Economy set to grow by more than the Government forecast

Ireland’s economy is set to grow this year by more than the Government has forecast with the country expected to build on the momentum seen as it exited an EU/IMF bailout, a Reuters survey of economists showed yesterday.

Ireland became the first eurozone country to complete an international bailout at the end of last year and the economy is showing signs of picking up steam after barely eking out growth in 2012.

The economy should expand 2.2% this year, according to the median forecast of 10 economists polled by Reuters, a better outturn that the 2% seen in the last poll in November and the 1.7% predicted a month before that.

The more upbeat outlook, which compares to a government forecast for gross domestic product (GDP) growth of 2% in 2014, comes after data last month showed that the economy grew by 1.5% in the third quarter with unemployment shrinking at its fastest pace in four years.

“The Irish economy is gaining momentum all the time, as shown by a wide and rising number of economic indicators,” said Eoin Fahy, chief economist at Kleinwort Benson.

“Although of course it still faces many challenges including high unemployment and high public debt, a return to something approaching ‘normal’ economic conditions is now in prospect.”

Ireland desperately needs growth of between 2% and 3% to sustainably reduce a debt that hit 124% of GDP last year, particularly after it had to mark down forecasts for the last two years amid a return to recession in the eurozone.

As a moderate recovery takes shape across Europe, Irish exports are set to climb back to 4% this year from a mere 0.2% in 2013 while personal consumption is expected to grow by 1.2% this year, the poll showed.

The economists also predicted that house prices will grow by 7.5% this year, more than three times the increase in the equivalent forecast five months ago as prices, particularly in Dublin, begin to recover from a devastating crash.

The respondents also pointed to the recent purchasing managers’ index, which showed the services sector growing at its fastest pace in seven years and manufacturing activity on a solid footing, as further evidence of a better year ahead.

“The marked pick-up in leading indicators of Irish activity in H2 2013, especially purchasing managers’ indices , augurs well for an acceleration in the pace of economic activity this year,” said Oliver Mangan, chief bond economist at Allied Irish Banks.

Reuters