GNP heads for 3.7% growth

THE Irish economy is on the rebound with a record 76,000 houses being built, Gross National Product (GNP) growth heading for 3.7% and the tax take expected to be E1 billion more than forecast.

Davy Stockbrokers latest commentary on the Irish Economy records an upgrade in their forecasts on a number of key economic indicators in a bullish outlook for the normally cautious stockbroking firm.

“Reports from the main building materials suppliers and builders’ merchant groups indicate that sales to the housing sector are running well ahead of last year, while new house registrations were 10% higher in the first quarter,” Davy said.

The brokers said the final data for planning permissions for 2003 show the total number of permissions for last year exceeded 78,000, up 13% on 2002.

“Interestingly, the number of permissions for 2002 (69,314) was remarkably close to the eventual number of houses completed in 2003 (68,819).

“All in all, it looks like housing output this year will once again be substantially ahead of last year. Last month we revised our forecast for new completions in 2004 to 69,000 from 64,000. We are now increasing that forecast again, this time to 76,000 completions for 2004,” Davy said.

Davy said that as a direct result in the their forecast for the increase in the volume of construction there is a knock-on impact on their forecast for GNP growth in 2004 which they have increased from 3.4% to 3.7%.

Davy said the growth in house building in Ireland has been phenomenal, equal to about 14% of GNP with the number of completions equivalent to 19 per 1,000 of the population.

“To put it in context, in 2004 residential investment in the US, where there has also been a housing boom, will be the equivalent of less than 5% of GNP and the number of completions per 1,000 of the population will be a little over six.

“In Europe the number of completions per 1,000 of the population is less than five, in the UK the figure is less than three.”

The report’s authors believe that the tax take this year will be excellent.

“It is too early yet to begin speculating on the content of next December’s Budget but, at this point, it does look like the arithmetic facing the minister for finance will be less challenging than it has been for several years.”

The company expects that tax revenues for the full year could exceed target by anything between E500m and E1bn.

“And that makes little allowance for whatever windfall comes from tax on offshore accounts.

“As a result, Ireland will once again deliver an exceptionally impressive performance on fiscal ratios in an EU context.”