Economic growth will slow somewhat next year, though Ireland will remain one of the most rapidly expanding economies in the OECD area, according to a new report from Davy stockbrokers. Cliff Taylor, Economics Editor, reports.
It predicts that Gross National Product will rise by 4.6 per cent this year, slowing to 4 per cent in 2005.
The brokers remain broadly upbeat on the outlook, though they expect some "modest deceleration" in growth next year due to international conditions and a sharp slowdown in house construction growth.
However, low interest rates will continue to support growth, with the brokers now believing that the ECB will not raise rates next year at all, or if they do only modestly.
Their outlook is a good deal less bullish than recent predictions from Bank of Ireland economist Dr Dan McLaughlin, who has said that we are in a "Tiger 2" era and that GNP will rise by 5.5 per cent this year and 5.2 per cent next year.
Bank of Ireland is Davy's parent group, though they have separate economic research departments.
Looking to next year, the brokers say that the concerns include the removal of the significant fiscal and monetary stimulus to the US economy, possible pressures in the foreign exchange markets and the risk of further oil price hikes.
Overall, however, an analysis presented in the report is relaxed about the impact of higher oil prices. While oil prices are high in historic terms, the brokers say that the spike in prices this year has been nowhere near as severe as in 1974, 1979 or 2000. Given the weakness of the dollar which has held down prices in euro terms "it is hardly a shock at all".
A further reduction in consumers' real income is unlikely next year unless oil continues to reach fresh record highs, they say.
