Unemployment predicted to drop to 9% this year

A broad-based recovery built on strong exports and improving domestic demand will see unemployment fall to around 9% this year.

That is according to Merrion Stockbrokers, which yesterday released estimates predicting that the improving economic situation will see GDP grow by more than 4% and cut the budget deficit to under 2.5%. saying that The improving economic situation will also see GDP grow more than 4% and lead to a budget deficit of less than 2.5%, according to estimates released by Merrion Stockbrokers yesterday.

The unemployment rate stood at 10% in March, according to the CSO.

Merrion’s GDP forecast of 4.2% growth is ambitious given the Central Bank nudged its growth expectations up to 3.8% at the start of April.

Overall the picture portrayed by Merrion is broadly similar to a series of estimates released by the Central Bank and ESRI, among others, in recent weeks.

“The Irish economy posted robust growth of 4.8% in 2014 and 2015 is set to be another very positive year, topping the eurozone GDP growth table once again,” Merrion economist Alan McQuaid said.

“Ireland has benefited from its close trading ties with the US and UK, two of the strongest performers on the world stage in the past 12 months.

“But the most encouraging aspect is the pick-up in domestic demand, which augurs well for 2015. The sharp fall in the euro will be a huge plus for Ireland too. Taking all the relevant factors into consideration, it now looks like growth this year will once more be over 4.0%.”

Consumer spending is also tipped to pick up, with 2% growth in real terms, up from 1.1% in 2014, on the back of improving household finances, although Merrion acknowledged that many are still impaired.

Unlike a recent Daft.ie report, which predicted that recently introduced Central Bank mortgage lending regulations would prevent a return to double-digit housing price increases, Mr McQuaid said while they will dampen inflation somewhat, an increase of 10% is still on the cards.

Political risks, such as a British exit from the EU, as opposed to economic factors are the greatest threat to Ireland’s fortunes, according to Merrion.

These include a potential British exit from the EU and strong showings by Podemos in Spain’s national elections or Sinn Féin in the upcoming general election here.

Falling bond yields should also deliver significant savings on debt-servicing costs and provide room for manoeuvre in the budget.