Quarterly Economic Commentary, Summer 2005

July 01, 2005

News

01/07/2005

 

Quarterly Economic Commentary, Summer 2005

Daniel McCoy, David Duffy, Adele Bergin, Shane Garrett, Yvonne McCarthy

Embargo: Friday July 1st 2005 at 00.01a.m.



Some of the main findings of the analysis include:

 

 

  • Strong economic growth will continue for the foreseeable future. Economic growth as measured by real GDP is forecast to grow by 6.0 per cent in 2005 and 5.1 per cent in 2006. In terms of real GNP growth of 5.4 per cent this year and 5.0 per cent next is forecast.
  • Domestic demand is becoming an increasingly important source of economic growth. Investment activity and private consumption make a particularly important contribution. Private consumption is growing at its fastest rate since 2001, although some moderation of activity in the house-building sector will dilute investment growth.
  • The forecast relative strength of the euro over the next two years throws the spotlight on domestic competitiveness issues. Inflation is almost entirely concentrated in the services sector. This situation could be alleviated somewhat by enhanced competition and regulatory reform in those sheltered sectors.
  • Consumer price inflation is expected to average 2.2 per cent in 2005 and to rise moderately to 2.4 per cent in 2006. The rate of unemployment is expected to average 4.2 per cent this year and decline to 4.0 per cent next year.
  • Employment growth was remarkably strong in 2004 and into 2005, with most increases occurring in the services sector. Some slowdown in construction activity will temper future growth somewhat but still forecast overall employment growth of 2.8 per cent this year and 2.2 percent in 2006.
  • The healthy economic backdrop will ensure the public finances remain in a sound position, with the Government Debt to GDP ratio continuing to fall further below 30 per cent.