KEY ISSUES Context: Despite an unfavorable external and domestic environment, economic performance improved in 2013 after a difficult 2012. The European crisis led to a deceleration of activity in the nonprimary sector, but GDP growth is expected to reach about 4.5 percent owing to a bumper cereal crop. Inflation remained low. The external current account deficit declined and reserves remained stable at more than four months of imports. The fiscal deficit narrowed as expected, owing to lower international oil prices that reduced the cost of subsidies and as a result of measures taken by the government to control spending. However, unemployment remains high, especially among the youth and, despite progress over the past decade, much remains to be done to reduce poverty. Outlook and risks: Assuming an average cereal output, growth could reach about 4 percent in 2014, as nonprimary activity is expected to accelerate. However, the economy remains vulnerable to international conditions and a difficult regional environment. In this context, the outlook continues to hinge on the implementation of policies to strengthen the resilience of the economy, ensure stronger and more job-rich growth, and improve social protection, particularly for the most vulnerable. Policy discussions: Despite progress in 2013, further fiscal consolidation is needed; nevertheless, there should be space for investment and well-targeted social protection. In this context, the reforms of the tax, subsidy, and pension systems are important, as is the gradual reduction in the public wage bill. Reforms are also needed to improve the business climate, transparency, the judiciary, and the labor market to boost private investment, competitiveness, and employment. Greater access to finance is also needed. More flexibility in the exchange rate regime would help support competitiveness, enhance the capacity of the economy to absorb shocks, and support the authorities’ strategy for diversifying external flows away from Europe. In this context, the discussions focused on four intertwined themes: (i) conducting a fiscal policy supportive of external adjustment and growth; (ii) fostering a more growth-friendly business environment; (iii) adapting the monetary and exchange rate frameworks; and (iv) enhancing access to finance while further strengthening the resilience of the financial sector.