two years, have not materialized and most likely will not materialize. the world is finally getting accustomed to the idea that a structural deficit of around 3 % of gdp over the medium term can be sustained, and this should be the goal. the rise in the price of oil close to $ 40 per barrel is a serious threat to the world economic recovery and needs to be urgently addressed. if maintained, such a high price could impact negatively to the tune of 0. 5 % of gdp over the next eighteen months and will exacerbate inflationary pressures. fast rising world demand, especially in china with its low energy and raw - material efficiency ( as in the case for energy in the us ), is an important factor behind the steep rise of oil and particularly of raw and intermediate material prices. on the supply side, the policy of some big oil producing countries, which have subordinated the goal of a stable international environment conducive to sustainable growth world - wide to their short - run need for revenues to cover fiscal deficits, is also contributing to the maintenance of high oil prices. political factors may have also played role in the changing attitude of some producers. the rise in oil and raw material prices is accentuating inflationary pressures and may lead to a premature monetary policy tightening in many countries, especially if these pressures are allowed to spill over to wages. such a move would definitely lead to even slower growth than the mechanical impact of the rise in the oil price would suggest. especially in the us, which has followed an expansionary monetary policy in the last few years, a rise in interest rates may have a strong cumulative impact on growth. though such a development would help reduce the current account deficit it will certainly make fiscal consolidation in the us even more difficult. last, but not least, chinese growth may slow, but this is a welcome development since recent very strong growth was exacerbating disequilibria in china and world - wide. the authorities seem to have realized that growth close to 10 - 12 %, as recorded in the last few quarters, intensifies inflationary pressures and encourages investments in uneconomical projects, which have no chance to service their debt. the official inflation rate of 3 % is being questioned in financial circles, which estimate that actual inflation is closer to 6 % and if we include real estate and asset prices, inflation probably is even higher. recently, the central bank tightened monetary conditions and introduced credit restrictions and the authorities ordered the post

##aged due to temporary factors. meanwhile, persisting problems in the global economy restricted foreign demand, whereas stock accumulation started, albeit slowly, along with the improvement in domestic demand. in this regard, while the gross domestic product increased by 6 percent on an annual basis in the last quarter of 2009, it decreased by 4. 7 percent across the year ( figure 23 ). seasonally adjusted data indicate continuance of the recovery process in national income as of the second quarter of 2009 ( figure 24 ). data regarding the first quarter of 2010 indicate that the rebound in domestic demand is gradually becoming stable and broad - based. the influence of policy rate cuts besides the hikes in public expenditures are getting more pronounced and a relatively more robust activity in sectors sensitive to domestic demand is being witnessed. in this respect, the analysis of the recovery process in industrial production indicates that besides the sectors stimulated by fiscal incentives and their intermediate input suppliers as well as the nondurable goods sector and sectors with strong links to the construction sector have been on the rebound ( figure 25 ). there is no significant improvement in external demand. the global growth outlook continues to dampen economic activity, particularly in sectors that are relatively more sensitive to foreign demand. following the recent crisis, manufacturing firms that mostly serve external markets have been operating at lower capacity than local market oriented firms ( figure 26 ). thus, in line with our previous forecasts, domestic demand has remained more robust than foreign demand. yet, aggregate demand uncertainty continues to be a major concern, as inventory buildups have remained limited. against this background, the gradual recovery in domestic demand is expected to continue into the first quarter ( figure 27 ). however, i would also like to emphasize that the achievement of a two - digit annual growth rate is highly probable in the first quarter of 2010 due to the low base of the same period last year. the weak course of external demand continues to restrain economic activity and employment growth through its impact on industrial production. as a matter of fact, despite the recent partial recovery, indicators such as per capita hours worked across industries and capacity utilization rates of firms oriented towards export markets suggest that resource utilization remains low throughout the economy ( figure 26 ). the recovery in the labor market that started in the third quarter of 2009 continued into the fourth quarter, albeit at a slower pace. unemployment declined in seasonally adjusted terms, but still remains elevated ( figure 28 ). given that ample slack would continue to be a drag on investment and employment, signs