This investment portends enhanced prospects for economic growth in the coming years. The government projects that the economy will grow by 4.7 percent in 1998, with inflation in consumer prices dropping to about 6.5 percent. Macroeconomic indicators have improved steadily since the government undertook stabilization and structural reforms in the mid-1980s. Despite continuing improvements in tax collection, the budget deficit of the non-financial public sector increased to 3.3 percent in 1997 and to about 4.1 percent in 1998, largely a result of pension reform. Dollars are a legal means of exchange, and contracts can be written in dollars.
Banks offer dollar accounts and make loans in dollars.
Low rates of inflation at home and abroad have helped to lower interest rates. In September 1998 the average rate paid on dollar deposits was 7.8 percent, and the average rate charged on dollar loans was 15.3 percent. Increased bank competition and new foreign investment in the sector will likely cut financial spreads, making credit still cheaper in the near-term. There are no restrictions on convertibility or remittances. The official exchange rate is set by a daily auction of dollars managed by the central bank.