Thursday, March 27 14:31:11
Ireland will likely be the fastest growing country in the eurozone, with Irish GDP set to increase by 1.9pc in 2015 and then by 2.5pc and 2.8pc in 2016 and 2017 respectively, according to the spring EY Eurozone Forecast (EEF) today.
Although the Eurozone is now growing, it is still expected to lag well behind other major economies during the recovery, the forecast said.
It shows that Eurozone GDP in 2018 will be only about 5pc above its pre-financial crisis peak in Q1 2008.
After two years of decline, the forecast predicts growth of 1pc in the Eurozone 2014, followed by a pick-up to 1.4pc in 2015, before moderately increasing to 1.6pc a year in 2016-18.
However, there are reasons for cautious optimism as there will be a gradual recovery in consumer spending and business investment.
"Ireland is continuing to pull ahead of the other peripheral Eurozone countries in emerging from the crisis. The recovery in domestic demand appears to now be more firmly entrenched, while net trade will continue contributing positively to the economy," the report said.
Tom Rogers, senior economic adviser to the EY Eurozone Forecast said that the eurozone recovery is likely to gather momentum this year but risks to the forecast do remain.
"While the risks of a breakup have diminished and some of the peripheral countries have surprised on the upside, deflation and unemployment will remain ongoing concerns."
Mike McKerr, Managing Partner, EY Ireland said that, although the overall outlook remains patchy, there is finally some more positive news to report in this forecast, particularly in the peripheral countries in the Eurozone.
"As their economies continue to rebalance and their labor forces become more competitive, businesses from Ireland, the rest of the Eurozone and other parts of the world could gain a competitive advantage by expanding operations or exporting into these countries," he said.
The forecast predicts a variable pace of recovery across different member states. Divergence is nothing new, but the divide is no longer simply between the core and peripheral countries. Some of the peripheral countries that have implemented painful reforms in recent years, notably Spain and Ireland, are benefiting as world trade picks up. EEF now expects Spain to return to growth of 0.8pc.The fastest growth in the Eurozone is expected to be seen in the newest member, Latvia, which is projected to grow by over 4pc, followed by Estonia at 2.5pc.
By contrast, GDP growth in France is forecast at only 0.7pc, below the Eurozone average. Other core countries, including Belgium, the Netherlands and Finland, are also set to experience very subdued growth, adding to concerns about their medium term prospects.
Growth in 2014 will initially be led by exports. This will be helped by the pickup in world demand, particularly in the US, which is expected to grow by around 3pc. Exports have been an important driver of the recovery in peripheral countries, and they will benefit further if a weaker euro makes their products more attractive on the global market. Exports are expected to grow across the Eurozone to 3.5pc in 2014 and 4.1pc in 2016.