Private consumption is now recovering from the protracted adjustment following the collapse of the;household credit bubble in 2002 and exports have begun to pick up. These factors are projected to;boost economic growth from 4% in 2005 to around 5% in 2006-07. Underlying inflation is expected;to increase to the mid-point of the central bank’s 2½ to 3½ per cent target zone in the context of;stronger growth and higher energy prices.;Monetary policy should focus on the medium-term inflation target, accompanied by a flexible;exchange rate policy. Concerns about rising housing prices in some parts of the country should be;addressed through tax measures and policies to increase supply. Further reforms are needed to;address the structural causes of weak domestic demand, notably household debt delinquency.