Central Bank almost doubles growth forecasts

Central Bank almost doubles growth forecasts

The Central Bank has dramatically revised up its estimates on how well the economic recovery is taking hold.

While it says the revival is not as strong as some statistics suggest, it points to a near doubling of previous forecasts for the growth of business and services this year.

The authority’s quarterly bulletin has estimated GDP – which includes the profits of multinationals – will soar to 4.5% this year. Its previous outlook said 2.5%.

And it also increased its expectations for next year, with the same measure up a fraction to 3.4%.

On the home front, GNP – which some commentators regard as a more honest measure of how economic figures are reflected on the ground – is also being forecast to soar.

The estimates are being upgraded from 2.8% for 2014 and 2.7% for 2015 to 4.9% and 3.1%.

The Central Bank said its revisions were significant and based mainly around the success of exports and the inclusion for the first time of business done by Irish firms which manufacture overseas.

Steady improvements in the jobs market are also expected to continue with a gradual fall in unemployment to 10.3% next year.

In its commentary the Central Bank said the recovery has gained momentum and is broadening.

But it warned that the underlying strength of the new growth in business and services is not as powerful as other reports suggested in recent months.

The Central Bank said figures of 7.7% GDP and 9% GNP from the Central Statistics Office (CSO) for the previous 12 months overstates the scale of the improvement.

However, it pointed to other data, such as employment and income levels, which it said indicates that the recovery has strengthened and is becoming more balanced.

It also noted a growth in consumer spending and said that along with more investment spending, domestic demand would this year contribute positively to economic growth for the first time since the downturn.

The Central Bank cautioned however that continued high unemployment and debt levels will act as a headwind to the recovery.

Its advice to the Government for the upcoming budget is to use the extra money it is taking in from tax this year to reduce debt.

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