Growth is projected at 3.1% in 2026 and 3.8% in 2027. Higher energy and commodity prices are depressing domestic demand amid tight financial conditions. By late 2026, improving consumer sentiment and lower interest rates will underpin stronger consumption and investment. The decline in inflation will see annual headline inflation falling below 20% in the first half of 2027. A key risk is that the evolving conflict in the Middle East and the resulting price pressures slow the disinflationary process further.
Interest rate cuts have been kept on hold since the start of the Middle East conflict. Maintaining tight monetary policy is key to lower inflation expectations, which remain far above the central bank’s inflation target. Future rate increases should not be ruled out. Contractionary fiscal policy should continue to complement monetary policy efforts to tame inflation. Accelerating the deployment of renewable energy would help bolster energy security and curb emissions. Better tax incentives to encourage female labour force participation, improving skills and reducing barriers to entry in services can support current efforts to raise long-term growth potential.
