Central Bank cuts growth forecasts

The Central Bank has cut its economic growth forecasts.

In its latest quarterly bulletin the bank said that the value of business and services will grow by just 0.5% this year – down 0.2% on a previous prediction.

It is estimating that the economy will push on next year, though, and turn out growth of 2%.

The Central Bank said its figures point to continued gradual recovery, but slower than it originally anticipated after exports slowed and consumer spending dipped this year.

The bank said it was also cutting its projections for the Irish-owned sector of the economy, gross national product, down to 0.1% and 1.2% next year.

Unemployment is forecast to be 13.6% this year and 13% next year.

The report noted that full-time employment is growing for the first time since early 2008 and it said this suggests that consumer spending will be boosted.

The bank warned of three challenges that remain – fiscal consolidation, banking soundness, and competitive wages and prices.

With the October 15 budget just around the corner and preparations being made to leave the bailout programme, the bank advised that the Government push on with plans for a €3.1bn adjustment.

“No easing off,” was the message from the report.

“Market participants will focus closely on how Ireland is likely to perform outside the (bailout) programme and whether the sustainability of the overall debt position is firmly secured,” it said.

“These considerations underpin the bank’s view that there should be no easing off in adjustment.”

Central Bank Chief Economist Lars Frisell meanwhile is recommending a greater adjustment than €3.1bn

"Stick with the planned fiscal adjustment - we would see any scaling back from it just as a very risky strategy for Ireland," he said.

"So I guess that's our main message."