BoI changes its mind on economy, predicts growth

Bank of Ireland has changed its mind on the economy, saying it will show slight growth in 2013 before strengthening next year.

Two months ago, the bank suggested the economy would remain flat in 2013, with 0% GDP growth likely.

However, in its latest quarterly economic outlook, published yesterday, Bank of Ireland said the slight recovery in the second quarter of this year (following contraction in each of the previous three quarters) leads it to expect GDP to rise by 0.4% this year, before rising by 1.9% in 2014.

In GNP terms — which excludes the contribution of foreign multinationals to the economy — Bank of Ireland expects to see 2.5% growth this year, followed by 1.5% next year.

The ESRI has forecast GNP growth of 2% for 2013 and 2.7% for 2014. The Central Bank recently lowered its GDP forecasts to 0.5% for this year.

Bank of Ireland’s change in sentiment comes on the back of a positive second-quarter turnaround in export performance and consumer spending; both of which — it expects — will show growth next year.

“We expect employment to rise further next year, which together with some modest pick up in earnings growth will boost personal disposable incomes and support consumer spending.”

Ireland’s export performance in 2014 should be driven by expected increases in the British, US, and eurozone economies, and result in 3.5% annual growth.

Consumer spending levels — although relatively flat this year — should rise by over 1%.

“The €2.5bn adjustment announced in Budget 2014 will have a dampening effect on economic activity,” Bank of Ireland said.

“However, we still expect domestic demand to increase by more than 1%, with a strengthening of investment — together with the increase in consumer spending — more than offsetting another fall in government spending.”

The bank expects inflation to remain subdued, the annual rate amounting to 0.7% this year and 1.1% next.


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