The significant surge in coronavirus infection rates and the associated intensification of containment measures since the summer constitute clear headwinds to the short-term outlook. In fact, recent hard data, survey results and high-frequency indicators point to a significant softening in economic activity in the final quarter of the year. Moreover, economic developments continue to be uneven across sectors.
The need for fiscal consolidation is also likely to constrain public sector employment growth, which to date has been the main driver of employment growth since the onset of the crisis. The environment for monetary policy became increasingly complex under these conditions, with the inflation outlook deteriorating as the economy weakened.