Key developments and challenges

GDP is expected to contract by about 4 per cent in 2009, with a modest recovery in 2010. The main macroeconomic challenge is on the fiscal side, as the authorities try to control pressures for greater spending. On the external side, the key risk lies in the expected sharp reduction in foreign direct investment (FDI) this year, which will make it harder to finance the current account deficit (over 17 per cent of GDP in 2008, although falling sharply in 2009).