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May 2003- A study carried out by Pricewaterhouse Coopers predicts that Ireland will become the most expensive country in the eurozone in 2003.

The report Consumer Pricing Report 2003 was commissioned by Forfás, an Irish Government agency, in response to growing concern, among policymakers about sustained high rates of consumer price inflation within the Irish economy. The study comprises two main elements: a comparative analysis of consumer prices in Ireland and other EU15 countries; and an analysis of the major product/service drivers of consumer price inflation in Ireland in recent years. It represents a partial update of a study undertaken by PricewaterhouseCoopers (PwC) for Forfás in 2002 on consumer prices in Ireland.

Comparative Price Analysis

Research commissioned by Forfás in the aftermath of the € changeover in 2002 found Ireland to be the second most expensive country for consumer goods/services in the eurozone in 2001, after Finland. The intervening period has witnessed no real abatement in rates of consumer price inflation in Ireland, which remain anomalous in an EU15 context. The implication of this sustained inflation differential between Ireland and the EU15 is a further deterioration in the affordability of goods/services in Ireland vis-à-vis our European neighbours. PwC projections to end 2002 indicate that Ireland has almost reached price parity with Finland, and looks set to emerge as the most expensive country within the eurozone in the very near future if current inflation differentials between the eurozone’s two most expensive countries persist (see Table 1 – shading indicates a more expensive country).

Widening the net to include the non-eurozone EU15 economies, i.e. Denmark, Sweden and the UK, Ireland is found to be the fifth most expensive country in the EU15 in 2001 – the three Scandinavian countries and the UK being more expensive than Ireland in this year. While this ranking is consistent with the finding for 2000, the large consumer price inflation differential that has existed between the UK and Ireland for some time suggests that consumer prices in Ireland may now be equal to those in the UK. It is therefore likely that by 2003 Ireland will be the 3rd most expensive country in the EU15.

An analysis of the relative affordability of product/service groups within the EMU12 in 2002 found Ireland to be particularly expensive for tobacco (1 = 1st most expensive), pubs and restaurants (1), food and non-alcoholic beverages (1), residential rents (1), off-licence alcohol (2), and recreational and cultural services (2). By contrast, Ireland was found to be relatively price competitive for clothing & footwear (11), communications (9) and household utilities (7).

Table 2.2 presents a more detailed look at price differentials between eurozone countries by broad category of consumer expenditure at end 2002, with shading indicating a country that is more expensive than Ireland. Again, it should be noted that the data presented in Table 2.2 are PricewaterhouseCoopers estimates, based on the application of 2002 Eurostat inflation data for the eurozone countries to 2001 Eurostat/PPP comparative price indices.

Download the complete Forfás report (in PDF Format-you will need to have the Acrobat Reader installed)

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