As vaccination advances and restrictions are progressively lifted, economic activity will pick up strongly. GDP is projected to grow by 5.9% in 2021 and 6.3% in 2022, supported by pent-up demand, the national recovery plan and a gradual pick-up of tourism. Reduced uncertainty will lead to a sharp decline in precautionary saving and support private consumption. Investment is expected to pick up significantly from the second half of 2021 as expectations improve and the Next Generation EU funds provide additional support.
Fiscal policy is set to remain expansionary in 2021, supporting firms and workers in the most affected sectors and regions. The announced direct aid to viable firms should be executed swiftly. Improving the efficiency of active labour market policies and ensuring training opportunities for workers on job retention schemes are important to support workers disproportionately hit by the pandemic. Promoting out-of-court proceedings, especially for SMEs, should be prioritised to prevent court congestion when the insolvency moratorium expires.