The economy is likely to remain flat this year with 0% GDP growth now likely, Bank of Ireland warned yesterday.
In his second quarterly outlook of the year, the bank’s chief economist, Dan McLaughlin, forecast 0% annual growth across a range of key metrics, including GDP, exports and imports; adding that personal consumption will drop by 0.5%.
It marks Dr McLaughlin’s second consecutive forecast downgrade, having in April lowered his 2013 GDP growth forecast from 1.5% to 1%.
His latest take is based on anticipated weaknesses in Ireland’s overseas trade performance and domestic demand — with uncertainty surrounding the wider European economy also making it difficult to call how next year will pan out.
“The uncertain global outlook — particularly in relation to the eurozone — makes any forecast for 2014 even more tentative than usual, while it is also unclear how much further household deleveraging is likely to go, in terms of the domestic economy,” Dr McLaughlin said.
“The current consensus is that an upturn in global growth will materialise and this will boost Irish exports, although that expectation was also present earlier this year,” he added.
“The ongoing weakness in Europe adds to the uncertainty surrounding any economic projections for 2014, but for the moment, we will side with the consensus in expecting a pick-up in Irish exports and, hence, GDP growth,” he said.
For 2014, Dr McLaughlin is predicting GDP growth of 1.5% and export growth of 3%. Inflation is likely to average 0.9% this year and 1.5% next year, he added.
However, he forecasts economic growth — in GNP terms — of 2.5% this year and 1% next.
Dr McLaughlin’s outlook mirrors that of Alan McQuaid of Merrion Stockbrokers who earlier this week also forecast 0% GDP growth for 2013 and 1.5% for next year, before a better pick-up to 2.5% in 2015.
Dr McLaughlin is, however, slightly more upbeat regarding unemployment, with the rate set to continue its gradual decline from 14.7% last year to 13.8% by the end of this year and to 13.3% by the close of 2014.
He added that the Government could lower the budget deficit to 4.3% of GDP, comfortably beating the 5.1% end-of-year target.
However, he also noted that the prospect of the European Stability Mechanism (ESM) taking on Ireland’s legacy bank debt “appears slim”.
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