Ibec: Weak euro will deliver 1% growth

Ireland stands to benefit more than any other eurozone member from the weakness of the single currency, according to employers’ representative Ibec.

In its latest quarterly economic outlook, Ibec said a weak euro would ensure that Ireland’s exporters would drive a second successive increase in annual GDP in 2012.

The body has reiterated its forecast for growth of 1% in the economy this year.

In May, Ibec marginally increased its economic forecast from 0.9% to 1%, making it one of the most bullish commentators on the Irish economy.

“International trading conditions are tough at the moment, given the sharp slowdown in almost all markets since the start of the year, but Irish exporters are faring relatively well,” according to Ibec’s chief economist Fergal O’Brien. He said the weaker euro was “a major positive” for Ireland. Coupled with our improved competitiveness levels, it means Irish companies can grow both revenues and market share in stagnating international markets.

“Ireland sold 62% of its exports to markets outside the eurozone last year — well above the average for other member states.

“The annual average euro exchange rate, this year, against both the US dollar and sterling is likely to be about 10% weaker than in 2011.

“The Irish economy will benefit more from this than any other eurozone country,” Mr O’Brien said.

Elsewhere, Ibec said falling interest rates would result in average mortgage costs falling by €2,000 this year, which would increase the spending power of mortgaged households by 3%.

However, that positive stance is diluted by a forecast of consumer spending remaining “very weak” and the prospect of poor summer weather further hitting the economy.

Ibec has also noted increased levels of investment by companies and said construction activity was edging closer to bottoming out.

It also hailed the NTMA’s movements to return to the bond markets as proof of a vast improvement in Ireland’s reputation among international investors.

According to Mr O’Brien, markets were responding to “sensible policy decisions”, namely, the yes vote in the recent referendum and strong implementation of the memorandum of understanding with the troika.

The major task for Government, now, was to restore activity in the domestic economy and get more people back to work, he said.