The European Commission's latest economic forecast says Ireland will continue to show high growth while inflation should moderate. It predicts GDP growth of 10.5% this year, with an inflation rate of 5.5%.
The Commission says double digit growth cannot continue with a tight labour market, and predicts a slight slowdown in GDP growth in 2001 and 2002, to 8.2% and 7.1% respectively. It also forecasts that export growth will decline as the euro recovers and rising labour costs erode competitiveness.
The report says domestically generated inflation is becoming increasingly important, but predicts CPI inflation of 3.8% in 2001 and 3.2% in 2002 as competition limits price pressures. But it warns that house price rises and wage rises will create inflationary pressures. The report expects wage rises to drift above those in the national agreement but believes a wage-price spiral can be avoided.
The Commission says the public finances are in excellent shape and predicts a surplus of 4.2% of GDP this year.
* The Commission paints a rosy two-year economic forecast for the EU, calling the current economic situation 'the best for 10 years', while blaming rising oil prices for a slowing growth rate and a weak euro for 'imported inflation'.
But it says growth has probably peaked in the second quarter and warns that tax from growth is being spent to cut taxes rather than to cut deficits.
The report predicts average GDP growth of around 3%, down from the 3.4% forecast for this year, with average inflation above 2% this year and next.
