PwC launches latest Irish Economic Outlook

Irish economy likely to contract by 4.1% in 2009

The latest economic analysis from PricewaterhouseCoopers (PwC) shows that the Irish economy remains weak and has contracted in 2008, for the first time in 25 years. The rate of Irish economic growth is forecast to plummet from 6% in 2007 to -4.1% in 2009, following an estimated 1.1% contraction in 2008. Ireland’s economy is now expected to contract more than any other country in Euroland in 2009.

The housing market remains weak, with spillover effects being felt in the real economy. Unemployment continues to rise, with falling demand for housing heavily impacting employment in the construction sector. The retail sector has started to suffer, with those businesses linked to the housing market also being severely affected. This combined with the further weakening of Sterling against the Euro will continue to adversely affect the Irish economy.

The rate of consumer price inflation in Ireland has continued to moderate and is likely to continue to do so, as demand for goods and services weakens further.

PwC’s analysis also concludes that risks are firmly on the downside given the ongoing financial market uncertainty and its impact on consumer demand and business investment both domestically and abroad.

At the European level, the Euroland economy is now in a technical recession, driven by contractions in several key economies. Lower consumer spending and business investment have pushed the ECB to cut its key interest rate over recent months, aided by easing inflationary pressures. Further rate cuts are expected in 2009 to stimulate Euroland economic activity, while additional fiscal stimulus packages are expected to be unveiled by a number of countries. However, continued financial market instability, tighter credit conditions and weaker external demand will constrain growth in 2009.

Yael Selfin, Head of Macro Economic Consulting at PricewaterhouseCoopers, commented that:

“The Irish economy is suffering from low consumer confidence and spending as employment prospects deteriorate. At the same time its main trading partners are sliding into recession, which should see falling export demand in the short term. The weakening Sterling against the euro is putting additional pressure on exports to the UK, which account for around a third of Ireland’s total exports. This combination is likely to see the Irish economy in a much worse shape than it has been for a long while.”

Notes to editors

  1. The table below sets out PricewaterhouseCoopers’ forecasts for economic growth in the Euroland (excluding Malta, Cyprus and Luxembourg) and UK economies in 2008 and 2009:

  2. The member firms of the PricewaterhouseCoopers network provide industry focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network work collaboratively using connected thinking to develop fresh perspectives and practical advice.

  3. For more macroeconomic analysis by PricewaterhouseCoopers, please visit www.economics.pwc.com