conditions have gradually been normalised since december 2005. this process has been correcting the benign monetary conditions of the spanish economy in recent years and promoting a more balanced growth pattern. the most valuable contribution fiscal policy can make is to ensure the commitment to budgetary stability. this commitment has been essential for establishing the conditions propitious to the recent long period of economic growth of the spanish economy and it is particularly relevant to the macroeconomic setting i have described. the latest official forecasts for the general government account are for a surplus of 1. 3 % of gdp in 2007. this would amply meet the requirements of the stability and growth pact and enable a further reduction of the public debt / gdp ratio. moreover, it represents an improvement of 30 bp on the target set in the latest update of the stability programme. this improvement basically reflects a positive deviation of tax revenue with respect to budget, in a setting of higher - than - expected growth. the target set in the draft state budget for 2008 for the general government surplus is 1. 15 %, in a macroeconomic scenario characterised by a mild slowdown in gdp. the projected decrease in the surplus is based essentially on tax cuts mainly affecting personal and corporate income tax, whereas on the spending side the draft budget sets a growth rate for the state in line with expected nominal gdp growth. this entails strict compliance with the ceiling established in the budget stability law in june. in any event, it should be kept in mind that the budget is based on a projection for end - 2007 that is very prudent on the revenue side. the strong buoyancy of receipts in the year to date, particularly in direct taxes, might enable the latest official projection of the surplus for 2007 to be exceeded. should this occur, under a macroeconomic scenario similar to that assumed in the budget, this improved result in 2007 should be carried over to the budget for 2008 and thus enable another surplus in excess of projections. what is most important is that, as in previous years, the additional revenue that may arise should not lead to increased spending, but rather to a higher surplus. regarding the size of the budget surplus, i wish to underline that the current situation of public finances is, in part, temporary. this is because, after ten years of rapid expansion at a rate that has recently exceeded potential growth, the actual buoyancy of tax revenue has naturally been associated with the buoyancy of domestic demand and, in particular, with the vigour

russian companies and banks to external markets raising concerns regarding the upcoming external debt payments. however, the impact of the external factors on the economic situation should not be considered unidirectional. external trade restrictions and ruble exchange rate dynamics have enhanced the competitiveness of russian exports and boosted import substitution. the recent months see accelerated annual growth rates of industrial production ( almost two - fold in september - october as against 1. 5 % in the first six months of the year ) and improved sentiment of manufacturers. net export contribution to gdp growth increased. nevertheless, amid high uncertainty this output growth is not yet accompanied with investment increase. consumer demand also weakens due to the slowdown in annual bis central bankers ’ speeches growth of real income of households which has contracted to 0. 5 %. as a result, procurement manager sentiment index in the service sector deteriorates. the situation in the labour market remains unchanged, seasonally adjusted unemployment rate stayed at 5. 2 % in october. broad set of labour market indicators, including the number of working hours, number and length of unpaid vacations, and others do not bear evidence of considerable concealed unemployment. according to our estimates the labour productivity growth slowed down to 0. 7 % in january - october this year with persistent gap between the growth of wages and labour productivity signaling of slow pace of economic restructuring. these factors affected gdp dynamics. our estimate of the gdp growth in 2014 has been slightly raised to 0. 6 %. due to the transition to the floating exchange rate, the foreign exchange market absorbs external shocks preserving relative stability of other segments of the financial market. for comparison, during the global crisis of 2008, the volatility of the money market rates exceeded the current values ten - fold. the banking sector continues stable servicing and funding of the economy. during the previous 11 months, loans to non - financial organisations grew by 12 % and loans to households by 12. 7 % ( adjusted for currency revaluation ). the financial system gradually adjusts to inflation targeting and floating exchange rate. time lag of the reaction of the banking sector to the change of the bank of russia key rate remains large though, according to our estimates, gradually shrinking. this refers to deposit rates as well. as lags shrink, the effectiveness of the interest rate channel of the bank of russia monetary transmission mechanism will improve. as for the foreign exchange transmission channel, its impact is complicated due to the high volatility in the foreign exchange market which resulted, inter