Central Bank sees big growth

The Central Bank yesterday raised its economic growth forecasts, saying that the country is enjoying “an exceptionally strong” recovery.

It said it would prefer the country’s debts to be paid down more quickly, but made comforting comments on plans by Finance Minister Michael Noonan for his budget later this month.

In its latest quarterly bulletin, the Central Bank said that its new forecasts “suggest that the economy overall is going through a period of exceptionally strong growth which is forecast to ease only modestly next year.”

It said it wanted the national debt to be paid down because there was no guarantee that conditions driving the strong recovery will last.

It said that it will not get drawn on the fiscal numbers that Mr Noonan should present in his budget.

But Gabriel Fagan, chief economist at the bank, cited the assessment by the fiscal watchdog, the Irish Fiscal Advisory Council, which last month said the plans for spending rises and tax cuts worth €1.5bn in the looming budget would not after all break strict EU budget rules.

Earlier this week, the Economic and Social Research Institute however said there was little justification for stimulating the economy through personal tax cuts because consumer spending was already recovering.

Asked about plans by the Coalition for supplementary budgets to meet spending over-runs this year, Mr Fagan indicated that it was important that the Government sticks to its budget plans.

The Central Bank said that it is monitoring but has no plans at this stage to revise its mortgage lending rules for house purchases. It projects the economy will expand by 5.8% this year and grow briskly next year too, by 4.7%.

The Irish recovery is currently very strong, but growth will in time return to annual rates of 2% or 3% in time.

Growth has broadened and has “moved well beyond” relying on exports only, as more people in jobs and lower oil prices boost spending in the domestic economy.

“With respect to the public finances, exchequer developments have continued to be unusually favourable,” said the Central Bank.

“Tax revenues have continued to grow ahead of target and overall expenditure has remained lower than profile in the year to date.”