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  • Full-year real GDP growth is expected to come in at around 4.1% in 2007, exceeding a 3.9% initial official projection. Domestic demand remains the main engine of economic activity, while the external sector continues to exert a negative contribution. Economic prospects for the coming 2-3 years look favorable, with annual GDP growth rates expected in the 3.5-4.0% region. Variations in the composition of future growth are likely to be marginal, with economic activity remaining domestic demand-driven. 
  • According to the 2008 draft budget, the bulk of fiscal adjustment next year is projected to come mainly via higher ordinary-budget revenues, which are projected to slash as much as 1ppt-of-GDP off next year’s general government budget deficit. Medium-term challenges to fiscal consolidation include: (i) expenditure pressures due to large interest payments and amortization costs