PwC: Future looks good for economy and housing

The latest PricewaterhouseCoopers' (PwC) European Economic Outlook report published today says Ireland's economic growth should remain strong, but 'Euroland' prospects are uncertain.

The PwC report says that house prices in Ireland and other Euroland countries should experience a soft landing despite the big rises in prices recently.

The risk of a bumpy landing is much greater in the UK, the report adds.

PwC economist Rosemary Radcliffe predicts that a soft landing is the most likely outcome in Ireland, where strong income growth and lower interest rates as a result of euro entry means that the house price boom of the 1990s seems to have been underpinned to a large degree by economic fundamentals.

Ireland is expected to lead the way in the EU with growth of around 4.5% in 2004 rising to 5% in 2005.

This compares to average EU growth of around 1.75% in 2004 and 2.25% in 2005, the PwC report predicts.

However, it warns that the Irish economy could be adversely affect by any global downturn, given its heavy reliance on exports and on inward investment.

The report says: "Looking ahead to 2005, considerable uncertainties remain as to the medium-term unsustainably of the US recovery, given its large budget and trade deficits, and any global downturn could dampen the export-led recovery in Germany, where domestic demand remains very sluggish."

Ms Radcliffe expects the European Central Bank to keep interest rates on hold for the rest of 2004, but rates could rise gradually during 2005 if growth is in line with PwC's main scenario projections.