The economy may finally emerge from seven years of deflation in fiscal 2006, although growth will slow to a real 1.9 percent from the 2.7 percent growth forecast for this fiscal year, according to a government report released Monday.

The report, produced each year about the time when the budget for the next fiscal year is compiled, was approved by the Cabinet in the afternoon.

The projected growth figure will serve as a policy target for the government for the next fiscal year, which begins in April.