European Commission reduces growth forecast

THE European Commission sharply reduced its growth forecast for this year as the cool winds of the slowing global economy affects both the EU and eurozone areas.

Governments and citizens need to be realistic about the situation, with countries keeping within their budgets and workers keeping their wage demands in line with increases in productivity, Economic and Monetary Affairs Commissioner Joaquim Almunia said.

Economic growth is expected to slow to 2% in the EU and 1.8% in the euro area for 2008, which is 0.4 percentage points less than last November’s forecast.

Inflation is expected to average 2.9% in the EU and 2.6% in the euro area, which is 0.5 percentage points more than in the previous forecast.

About half of this increase will be due to rising food and fuel prices, but there was little fear of the union being subjected to the stagflation forecast by the US Federal Reserve for the US earlier this week.

“So far, the European economy has weathered these headwinds relatively well, but can no longer escape unaffected,” said Mr Almunia. He sounded a note of optimism however saying that increased resilience thanks to reforms and the sound fundamentals, should help the region weather the storm.Growing pains: The Irish outlook

IRISH economic growth will slow to 2.9% this year from 5.1% in 2007 before rebounding next year, according to an index of forecasts by DKM Economic Consultants in Dublin.

Gross domestic product will probably expand 3.6% in 2009, Dublin-based DKM said in their quarterly Economy Watch.

Consumer spending growth will ease to 3.8% this year from 5.7%, the report said.