The economy has bounced back somewhat since the weakness at the start of the year, suggesting that much of it was just a temporary response to the snow and VAT rise. But the housing and consumer sectors, in particular, have failed fully to recover their lost ground. Meanwhile, the recovery is still based on shaky foundations, with many of the economy’s imbalances still far from resolved. (See Chart.) We continue to expect real GDP to grow by just 1% or so this year.
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