Bank lowers its GDP outlook

Ulster Bank has become the latest commentator to rein in its forecast for Irish economic expansion this year, lowering its figures for GDP growth from 1.3% to just 0.3%.

“Overall, the weak start to the year for GDP will make it very difficult for the economy to record any meaningful pick-up in its annual average growth rate this year,” Ulster Bank’s chief economist for the Republic, Simon Barry, said in his latest economic outlook, published yesterday.

Mr Barry said risks to the Irish outlook are “still skewed to the downside”. He has based his revision on GDP growth of just 0.6% in the first quarter of the year, adding that the economy will struggle to pick up this year, “from the paltry 0.2% recorded in 2012”.

Earlier in the summer, Bank of Ireland delivered its second consecutive GDP downgrade, saying the economy would see next to no growth this year, with Merrion Stockbrokers agreeing in its most recent outlook. However, in July, Ibec said it still sees the economy growing by over 1% in 2013, despite the slow start.

Yesterday’s commentary from Ulster Bank wasn’t completely negative, however. Mr Barry said there remains “important evidence” of emerging domestic recovery — shown by recent improvements in employment trends, property prices, and underlying investment which offer “a more encouraging read on the economy”.

“Recent indicators helpfully point to the emergence of a more positive growth dynamic in some important export markets,” he added. But overall, he now expects the first real results of economic growth not to be seen until next year, when GDP should increase by around 2%.

“The signs of a return to positive, albeit anaemic, growth in the eurozone and the indications of a pick-up in the UK economy provide important support for a base case which envisages some mild improvement in Irish growth momentum over the coming year,” he said.

For 2013 and 2014, Mr Barry is anticipating employment growth of around 1%; helping the unemployment rate to average 13.6% and 13.1% in each of the years; down from 14.7% last year.