The Outlook for 1989 and 1990: Tax Reform Underpinning Economic Activity

Activity will stay buoyant throughout 1989 yielding an average growth rate of 3 percent. Higher net incomes from the tax reform are boosting both investment and consumption and the international outlook suggests the rise in exports will keep most of its momentum. Unemployment will fall to an average rate of 5 percent this year and remain at this level in 1990. Consumer prices are expected to increase by 3 percent and 2¾ percent, respectively. The deficit on current account may widen by AS 3 to 4 billion per year, in spite of an underlying improvement in cost-competitiveness.