Domestic Demand Gaining Momentum

Economic activity is getting powerful stimulus from both foreign and domestic demand. Investment is currently the most buoyant demand component, while private consumption is spurred by the considerable income gains from the tax reform and high consumer confidence. In spite of the high year–on–year increase commodity exports seem to have lost somewhat momentum recently. Industrial output in the first half of 1989 was 6½2% higher than a year ago, with strong gains spread fairly evenly among different branches. A rising backlog of orders suggests further output growth for the rest of the year. Employment is about 50.000 (1¾%) higher than last year, but unemployment is only 5.000 lower due to growing labour supply. The rate of inflation is stable at 2,5 percent. The current account is in equilibrium, the worsening trade balance being offset mainly by higher net foreign currency earnings from tourism.