Merrill Lynch forecasts Irish economic growth of 1.6%

THE Irish economy could grow by as much as 1.6%, this year, according to Merrill Lynch, which has also said that the global economy will not slump into recession.

The company — which acts as the wealth management arm of Bank of America — issued its bullish outlook, yesterday, but tempered the positivity by suggesting that 2012 will still see a weaker euro and slower global growth.

In a presentation in Dublin, Bill O’Neill — chief investment officer for Merrill Lynch Wealth Management in the EMEA region — added that oil prices will remain flat in the first half of this year, before rising on demand in the second half. He also said that there will be “little value” in core sovereign bonds, with dramatic sell-offs of national debt unlikely.

Despite this, Mr O’Neill still expects Ireland to return to the bond markets by the end of this year, although he said there is no immediate pressure upon it to do so.

He added that Ireland’s trade position — the country’s trade surplus reached a record high in 2011 — will continue to improve.

Merrill’s 1.6% growth reading for the Irish economy goes against most domestic economists’ reading of between 0.3% and 1%; and is above the Department of Finance’s budget-time 1.3% expectation. Elsewhere, the company is forecasting 2.1% growth this year in the US economy and 3.6% growth in the global economy.

While Mr O’Neill noted that the Irish Stock Exchange outperformed most of its European peers in 2011, he said that the ISEQ — along with other small-level bourses — will probably need to seek alliances to maintain their long-term futures; as equity value will increasingly be sought, by investors, in large-cap US and British stocks.

Noting the growing divide between Europe’s leading economies and its peripheral members, Mr O’Neill said that the European Central Bank (ECB) will have to be more effective this year, adding that a “superhuman effort” is needed to contain this divergence.

“There is no silver bullet, but there will be a menu of options,” he opined. To that end, he said that the exercise of ‘quantitative easing’ — or printing fresh money to ease debt burdens — will become “a global phenomenon”, with the ECB emerging as a major player.