The Republic should retain its title as the euro zone's fastest-growing economy this week, but is likely to fall behind Luxembourg and Slovenia in the monetary union growth rankings in 2008, according to PricewaterhouseCoopers's latest report on economies using the euro.
The Irish economy will grow by 5.2 per cent in 2007, more than double the average growth rate for the euro zone as a whole, the latest economic analysis from the accounting and consulting firm has predicted.
The Republic is expected to better the performance of all other euro zone economies this year but decelerating growth should see Luxembourg and Slovenia move higher in the growth rankings by 2008, it said.
Investment and exports were the main drivers behind the first-quarter economic expansion, while consumer spending contributed little to overall economic growth, the report found.
In the future, consumers are likely to remain cautious in view of rising interest rates, the housing market slowdown and fewer maturing special savings accounts, it said.
The external environment remains broadly positive and the strength of the euro zone economy should help boost exports growth in 2007.
However, weaker demand in key markets in 2008, together with competitiveness issues related to the strength of the euro and the Republic's high rate of inflation, are expected to undermine exports growth prospects towards the end of 2007 and during 2008, according to PwC.
"The cooling housing market and consumer caution are potential drivers of slower economic growth in Ireland, particularly in 2008. However, our forecast points to a modest slowdown and keeps Ireland on a strong growth path over the next 18 months at least," said PwC senior economist Yael Selfin.
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