Central Bank: Outlook for domestic economy is brighter

The domestic economy is expected to grow slightly faster than initially forecast this year, the Central Bank has said.

In its second outlook for 2014, the authority said that continued improvements in the unemployment crisis were the clearest indication of a sustained recovery.

It originally forecast the home-grown sector of the economy – businesses which keep profits in the country and measured by gross domestic product (GDP) – to grow by 2.2% this year and 2.5% next year.

But it has upgraded that to 2.7% this year and 2.6% next year.

It sees gross domestic product, which measures the value of the wider economy including multinationals, performing at a slightly slower pace than originally expected – 2% this year and 3.2% next year.

In its commentary, the Central Bank noted that unemployment has come down from a peak of more than 15% to just below 12% in about two years.

It said: “Initially, the recovery in employment was confined to part-time jobs. However, recent quarters have seen steady growth in full-time employment, which seems broadly based. Signs of improvement are also visible in investment data, business and consumer survey measures and in more positive retail spending data.”

The Central Bank went on to forecast that unemployment will fall further, down to 11.3% this year and 10.4% next year.

Despite those positive reports, it said preliminary figures for economic performance for last year show a slight contraction mainly due to the end of special patents for lucrative pharmaceutical manufacturing. This has not had a major impact on the jobs front.

The report said: “Looking ahead, with patent expirations expected to have a continuing, but declining impact, improving external demand conditions are projected to support stronger export growth this year and next.”

The Central Bank said only gradual improvements were being made on the issue of long-term arrears and there continues to be a migration of loans into the very long-term arrears category.

Again the Central Bank heralded the successful conclusion to the bailout programme overseen by the International Monetary Fund and Europe and the positive attitude financial markets have to the Government.

But it warned the budget for 2015 must be geared towards sustaining the favourable outlook and ensuring the money markets believe Ireland is recovering.

It said: “To ensure that this confidence remains, it will be more important than ever that the Government prepare budgetary plans for 2015 that will convince observers that Ireland remains on track for fiscal consolidation.”

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