Household debts put economy at risk

IRELAND’S GDP growth for this year and next will be fuelled almost totally by domestic demand, but increasing household debt poses a risk to the economy, the European Commission has warned in its spring economic forecast.

It raised its growth forecast for the EU for this year to 2.3% from its pervious forecast of 2.1%. Growth last year was just 1.6%. It expects a slight deceleration in early 2007 due to Germany’s increased VAT rate affecting consumer demand.

Announcing the forecast yesterday Economic and Monetary Affairs Commissioner Joaquin Almunia said he expected a modest increase in employment while inflation should remain around 2% despite oil price increases.