Economy EU’s second-fastest in 2004

IRELAND will be the euro-zone’s second-fastest growing economy next year, well above the EU average and just slightly behind that of the US.

The news for 2005 is even better with Ireland achieving a GDP growth rate of 4.5% according to the prestigious Economist Intelligence Unit (EIU).

The EU’s own forecast for the euro-zone released yesterday says that recent hard data and survey indicators suggest the euro-area recovery remains underway and is gathering momentum.

Economic growth in the third quarter came in stronger than expected, business confidence is back at the mid-2001 levels and consumer confidence also shows some improvement.

A separate study on labour productivity shows Ireland way ahead of all European countries and the US at 5.1% for the six years, 1996 to 2002. The euro zone average is 1.3% while the US average is 1.7%.

Dan O’Brien, senior Europe editor in the EIU, said this is due to the export value of the pharma-chemical sector in Ireland.

About 30,000 people are employed in the industry whose exports were worth €40 billion last year.

Inflation in Ireland, traditionally the highest in the EU, is expected to drop to 2.9% next year, which will still be higher than the EU average. The country is expected to benefit from the expected upswing in both the US and EU economies.

The EU report also looks at business cycle linkages between the euro area and the US economies.

The sharp pick up in the US economy should benefit the euro-area, but its impact should not be overestimated, the report warns. Future episodes of what it describes as significant cyclical disconnection between the euro area and the US should also be expected.

Economic and Monetary Affairs Commissioner, Pedro Solbes, said now was the time for countries to take advantage of the improving short-term economic conditions to push ahead with the strategy and reforms agreed by the Union in Lisbon and specified in the Broad Economic Policy Guidelines.

A rule-based system was essential to ensure member states were treated equally while recent difficulties with multilateral fiscal surveillance call for stronger economic governance in the euro area, he said.