Economic growth in the euro area is expected to pick up speed in 2000 as financial recovery in emerging markets continues and a relatively cheap euro boosts demand for exports, the influential German research institute Ifo has said.
The Ifo report, scheduled to be officially released today, emphasises the positive spin on recent economic data signalling that the growth slump in euro-zone growth is now in the past and that more prosperous times lie ahead.
Ifo sees growth in gross domestic product in the 11 countries comprising the euro area returning to 2.6 per cent in 2000 after 2 per cent in 1999 and 2.6 per cent in 1998. The report, which follows some other upbeat statistics from the bigger euro zone economies, may help to lend some support to the beleaguered euro, which ended last week trading just above its lowest ever level against the US dollar of $.1.02.
"Domestic demand and especially foreign demand will expand more strongly than in 1999," Ifo said in the report.
"Although growth will be stimulated less than before by state spending, crises in important global regions will have been mostly overcome and the exchange rate to the dollar will still be favourable for western European exporters," Ifo said.
Contributing to rising domestic demand will be quickly expanding industrial investment while consumer spending increases only slightly from its current strong level, Ifo said.
The IFO forecasts highlight the extent to which the Irish economy is outperforming the average, with GDP growth here this year likely to be in the 7 to 8 per cent range, or possibly even higher according to some forecasters.
Last week, euro-area manufacturers reported signs of improving conditions for the third month straight. But the improvement for the area as a whole masked poor performances in the euro-zone's largest economy, Germany, and in Italy. It is the weakness in these two major economies in particular which has undermined confidence in the euro and led to its recent weakness.
Other key economic data have also underscored that risks and uncertainties remain although many pointed to a recovery in the second half of 1999, which will pick up speed in 2000
Ifo said that Germany's economy, the largest in the euro area, is due to expand by 2.5 per cent in 2000 after 1.5 per cent in 1999.
