Figures show continued economic growth

Thursday 21 December 2006 23.09
Dublin - ESRI warns of inflation high
Dublin - ESRI warns of inflation high

Official figures show that the economy continued to grow strongly in the third quarter of this year.

Gross domestic product expanded at an annual rate of 7.7%, the fastest rate for five and a half years, while gross national product grew by 5.4%.

GNP excludes the profits from foreign-owned companies. Its growth rate was sharply lower than the 9% recorded in the previous quarter.

A breakdown of the figures from the Central Statistics Office shows that consumer spending growth slowed in the third quarter of 2006 to 4.5% from around 7% in the previous two quarters.

Meanwhile, the Economic and Social Research Institute has forecast the rate of inflation in Ireland will reach 6% by January, the highest level for more than six years.

In its latest commentary the institute criticised the Budget for putting too much money into the economy; it said the Budget added to inflationary pressures at a time when the economy is already growing above its potential.

The ESRI predicts Ireland's strong economic growth will continue next year, although the pace of expansion at 5.3% will be a little bit weaker than this year's rate of 6.2%.

It forecasts that people will help keep the economy going by spending more on consumer goods than this year, as 750,000 people cash in SSIA savings accounts before the middle of next year.

The upshot will be 84,000 extra jobs, as well as an increase of 72,000 in the number of immigrants in the country.

The ESRI says higher electricity prices, higher mortgage repayments, and the hike in cigarette prices announced in the Budget are the key factors behind the inflation rate increase.

The institute also says the Department of Finance has underestimated the stamp duty and capital taxes likely to be collected from the economy next year by €1.5 billion.