Bank of Ireland has significantly upped its forecast for the economy, saying it will grow by 1% this year and that the country’s recovery is actually stronger than previously reported.
The bank had previously pencilled in a growth rate of 0.6% for this year. As well as making Bank of Ireland one of the most bullish commentators on the economy — more so than the Department of Finance — it marks the second high-profile positive adjustment to economic outlooks this week.
On Tuesday, the Central Bank said it now anticipates Irish GDP to grow by 0.7% this year, instead of a slightly more modest 0.5%.
In its latest quarterly economic outlook, published yesterday, Bank of Ireland said while economic growth is still “slow and uneven”, the recovery in Irish economic activity is stronger than initially reported.
“The economy is also now paying its way in the world and running a balance of payments surplus, unlike many of the other peripheral European economies, which means that the public sector deficit is now being offset by strong surpluses in both the household and corporate sectors,” according to the bank’s chief economist, Dan McLaughlin.
He said Ireland’s competitiveness has improved substantially over recent months and could be helped further by the falling euro, particularly against sterling.
Dr McLaughlin also noted a drop in yields/interest rates on Irish bonds to pre-bailout programme levels and said the country remains on track to match, or even beat, this year’s fiscal targets.
However, Bank of Ireland is also expecting consumer spending levels to fall by 1.5% this year — following 2011’s 2.4% decline — before picking up with a 0.5% rise in 2013.
For 2013, the bank is forecasting GDP growth of 1.5% and GNP growth, which excludes the multinational contribution to the economy, of 1%, after no movement this year.
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