Moreover, the increase of 0.5 per cent in the first quarter of 2005 overstated the strength of the economy somewhat and the indications are that growth has subsequently remained subdued. Though the economic recovery has lost momentum, nevertheless, we expect to see a gradual improvement in economic activity, supported by historically low interest rates and other favourable domestic and external factors.
At the same time downside risks to this outlook still exist – most notably the strength of energy prices, the large global imbalances and the low level of business and consumer confidence prevailing in the euro area.