The weaker domestic demand was a result of declining real disposable incomes and employment, and negative wealth effects as a consequence of the significant decline in equity and house prices. The negative trend in consumption expenditure was reinforced by a significant deceleration in the growth of credit extension to the private sector.
While progress is being made in a number of areas, more ambitious market-oriented structural reforms remain a challenge. Labour market reforms aimed at providing the right incentives to economic agents and the liberalisation of sectors still sheltered from competitive forces are areas in which progress is still needed.