‘State risks missing deficit target’
“It is possible that the Government will have to do a little more in terms of fiscal consolidation this year” to reach its deficit goal of 8.6% of gross domestic product, David Haugh, head of the Irish desk at the Paris-based OECD, said.
“The prospects for the Irish economy have weakened,” he said.
The OECD is reviewing its 1% growth forecast for the Irish economy for this year and “risks are definitely to the downside,” Mr Haugh added.
The Irish Central Bank on April 5 forecast growth of 0.5% and said the Government’s budget targets remain within reach even as the economy slipped into a recession in the last quarter of 2011.
Ireland will find it “tough” to re-enter international bond markets next year and yields need to fall to between 5% and 6% for funding costs to be sustainable, Mr Haugh said.
The country’s €67.5 billion international rescue programme finishes at the end of 2013.
Ireland’s October 2020 bonds, regarded as the benchmark, yielded 6.82% yesterday, down from 9.1% at the start of December. Finance Minister Michael Noonan said last month the Government will lower its 1.3% growth forecast.
Michael Saunders, head of European economics at Citigroup in London, said he expects the Irish economy to contract this year and that missed fiscal targets and weaker growth may require it to seek a second bailout.
“I think Ireland will miss its fiscal targets this year, next year, the year after that and probably the year after that as well,” Saunders said. “More cuts would be counterproductive as it would just deepen the economic hole.”
Ireland’s economy probably shrank for a third consecutive quarter in the first three months of this year, according to Saunders, who cited recent declines in retail sales, industrial production and property prices.
Bloomberg
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