Underlying inflation has remained subdued so far, even though it has drifted up in recent months to 2.7 per cent in October 2000. Short-term growth prospects are very favourable. Exports should remain buoyant, because of strong market growth and gains in competitiveness. And domestic demand should remain strong. Household consumption should be boosted by job creation, low interest rates and brimming consumer confidence that should outweigh the negative effects of the oil price hike.
Capital spending is also likely to rise substantially.
This should allow a decline in the unemployment rate to 10 per cent in 2002. Inflation may recede somewhat in 2002. However, underlying inflation is likely to drift up further over the projection period.