Irish growth forecasts increase

ECONOMISTS have increased their Irish growth forecasts for next year, ending two months of downgrades and signalling that the country’s medium-term prospects are improving.

Debate about a Greek sovereign debt restructuring has pushed Irish bond yields to euro lifetime highs and a further cut to medium-term growth prospects would have caused unease in Washington and Brussels.

Instead, a Reuters poll of economists put 2012 GDP at 2.1%, compared with 2% last month. They also upgraded estimates for 2013 GDP growth to 2.7% from 2.6%. Outlook for 2011 GDP growth remained at 0.5%.

“The pace of contraction in domestic demand is easing, and it is expected to turn broadly flat in 2012 as the declines in the housing market, employment and consumer spending bottom out,” said Oliver Mangan, chief bond economist at AIB global treasury.

The IMF forecasts economic growth of 0.5% this year and 1.9% in 2012.

The Government cut its 2011 GDP forecast last week, saying the economy would grow by 0.8%, down from 1.7% previously, before rebounding to growth of 2.5% next year.

The poll indicates that the Government is on track to get the country’s budget deficit, which reached 32.4% of GDP last year, below 3% by an EU-agreed target of 2015.

Economists agreed with the government that spending would surpass income by 10% this year.

Respondents also increased forecasts for debt/GDP in line with the Government, claiming sovereign debt would peak at 117% of GDP in 2013.