EU growth expected to exceed expectations

THE autumn economic forecast for the EU is the most upbeat it has been for some time, with growth for the year expected to exceed expectations at 2.1% for the eurozone and 2.5% for the EU as a whole.

However, these figures continue to be dwarfed by the statistics for Ireland, with GDP for the year predicted at 5.2% (3.7% in 2003), second only to the fastest growing new member states, Latvia, Lithuania and Estonia at between 5.7% and 6.2%.

The dangers of oil price increases and the unwinding of long-standing macroeconomic imbalances in the US were listed as the main risks to the optimistic forecast for the EU together with weak domestic demand and investor confidence.

Increased exports from Ireland are reflecting the more favourable trading environment globally, while imports rose more slowly during the first half of this year compared to 2003. The indicators suggest continued improvement for the final three months of 2004, though there have been some fluctuations in consumer sentiment, the report notes.

However, the Celtic Tiger is unlikely to return in all its former vigour, due to a less favourable external environment and a tighter labour market than witnessed in the second half of the 1990s.

Economic growth is expected to stabilise close to the rate commonly thought to be sustainable in the medium term. GDP is projected to grow by 4.8% in 2005 and 5% in 2006.

Unemployment is expected to remain close to 4.5% due to the cap on public sector jobs.

The maturing of the

Special Savings Incentive Accounts (SSIA) in 2006 is expected to boost spending though public spending will continue to be restrained.