Economy ‘to pick up by over 2%’

The economy will pick up this year posting more than 2% real growth, according to Merrion Economics’ quarterly outlook.

Chief economist Alan McQuaid said the economy would benefit from external factors that would help the country’s economy grow stronger than in 2013.

“Like the two years preceding it, 2013 was a damp squib for the global economy, beset by political wrangling in the US, recession in Europe, and disappointing growth in China. We are optimistic that 2014 will bring better times ahead — even if only slightly.

“At this stage it looks as though the Anglo-Saxon block will perform the best, which is good news for Ireland,” he said.

Unless there is another major shock to the financial system, Mr McQuaid said the economic performance should outstrip the government prediction of 2% growth.

“After a disappointing economic growth performance based on the CSO numbers, the Government’s official 2.0% growth projection for 2014 should be met if not bettered, assuming no major external shocks,” he said.

While the Irish exporters have led the domestic recovery, there are signs that this is beginning to filter through to the Irish economy.

The two-speed recovery of the property market is set to continue, according to the report, with Dublin leading the way. It is expected that Irish house prices will rise by 6%.

“The recent signs of general improvement in the labour market... should help sustain the housing market recovery in the short-term, especially in Dublin, though there may be a lag in the rest of the country. Following an estimated increase of 1.3% in 2013, we see an average rise in Irish house prices of around 6% in 2014,” he said.

Merrion believes that one of the key issues to driving Irish bond prices is the stewardship of the European Central Bank.

Mr McQuaid said the most positive and important factor for Ireland was having a US-style central banker at the helm of the ECB.

He said Mario Draghi staying in charge of the ECB was far more important than economic/budgetary fundamentals in determining the level of Irish bond yields in the short-term.