Ireland's economy will be the fastest growing in Europe in 2007, according to Pricewaterhousecoopers

Aoife Carr:

The analysis shows shows Ireland's economy growing by an estimated 5.9 per cent in 2006 and a projected 5.1 per cent in 2007, keeping the country at the top of the Euroland growth table in both years.

The pace of growth for the euro zone economy as a whole is estimated at 2.7 per cent in 2006 and a slightly slower 2.1 per cent in 2007.

The report identifies domestic demand as continuing to be the main driver of overall growth, despite slowing consumer spending in 2007. Consumer spending is expected to slow as interest rates rise further and employment growth weakens.

However, the release of funds from maturing Government-backed savings schemes is likely to provide a boost to disposable incomes and underpin consumer spending growth over the course of the year.

The report warns that high inflation and rising labour costs could lead to a continued erosion of Irish export competitiveness in 2007.

It predicts a slowdown in euro zone economic growth in 2007 owing to tighter fiscal policy in a number of member states, the lagged effects of past ECB interest rate rises, further possible appreciation of the euro and an expected slowdown in the United States, affecting euro zone exports growth.

Yael Selfin, senior economist at Pricewaterhousecoopers, said: "The Irish economy looks set to continue as the Euroland's top growth performer this year. Unfortunately Ireland is also likely to remain at the top end of the inflation league table, to the detriment of the important export sector and some areas of domestic demand."

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