With the third COVID-19 wave and the associated containment measures receding, economic growth is projected to increase to 2.6% in 2021 and 2.7% in 2022, led by consumption and exports. Business investment should strengthen in 2022 as uncertainty abates. Output will regain the pre-pandemic level by late 2021 and employment by mid-2022. The main risk to the outlook is that further virus waves could delay the recovery.
If there is a relapse in sanitary conditions, temporary support to reduce business costs should be extended. To encourage employers to limit use of the temporary layoff scheme to viable jobs, employers should contribute to the benefit costs of their furloughed employees. Once the recovery is firmly established and the pandemic has subsided, a medium-term fiscal strategy will be required to stabilise the debt-to-GDP ratio.