Growth forecasts too optimistic, says PwC
GROWTH in the Irish economy will be more muted than government forecasts, PricewaterhouseCoopers (PwC) predicted yesterday in a report that adds weight to the European Commission's contention that the Government is too sanguine about the prospects for growth.
The economy will expand by just 1.8pc next year, PwC said in the report. The Government's last official forecast sees the economy growing 3.3pc next year, while the European Union said last week it expects the economy to expand by 2.6pc.
The Commission warned the Government that its forecasts were too optimistic and said further cuts may be necessary to rein in the deficit. PwC sees the economy contracting a further 1.3pc this year.
"The Irish economy remains challenging and this year is likely to see continuing weakness in activity and employment," PwC said. "This latest 2010 prediction is underpinned by high unemployment, investment activity projected to decline, particularly in the housing sector, and tight fiscal policy weighing down consumer spending and growth."
A recent PwC survey revealed that a third of businesses expect growth to return in 2010, with a further 44pc returning to growth next year.
"We are now seeing companies beginning to position themselves for recovery, albeit some sectors will lag others," the report said.
"Export-led growth and a strong focus on innovation will be vitally important for Ireland's economic recovery," said Ann O'Connell, a partner at PwC Ireland. "At the same time a strong focus on our pipeline of foreign direct investment will be critical since consumer and government spending are likely to be constrained for some years to come."