THE Central Bank has lowered its 2011 growth projections for the economy, by nearly half a percent, but stressed it is only a case of a slowdown in momentum.
In its latest quarterly bulletin, the Central Bank said it expects the economy, in GDP terms, to grow by just 0.2% this year and by 2.4% in 2011.
When measured in GNP terms (which excludes the financial contribution from foreign multinational companies with a presence here), a 1.7% fall in the economy this year is likely to be followed by the same percentage rise next year.
In all, the latest growth projections are about 0.4% lower than the Central Bank’s previous outlook.
It added the latest projections are only based on the Government’s previous budgetary blueprint of €3bn in cuts and said that if December’s budget sees a larger adjustment, the outlook could be revised further.
The commentary underlined that the Government’s original adjustment path of €7.5bn in cuts – between 2011 and 2014 – wouldn’t be sufficient to bring Ireland’s budget deficit into line with the 3% of GDP target within four years.
“The main priority, in the short-term, is to ensure that the 2011 budget credibly demonstrates the first step of a re-programmed tighter fiscal plan, aimed at getting back on to a convergent path. This will necessarily mean a larger adjustment than the €3bn foreseen until recently,” yesterday’s commentary stated.
“Indeed, a review of the adjustment path should be completed as a matter of urgency, in order to ensure that it takes account of the many developments that have occurred since it was originally agreed.
“Equally important is to provide more details on how the adjustment will be achieved, as this will add to the credibility of fiscal reform,” it added.
Yesterday’s bulletin also underlined how economic growth is still over-reliant on exports, which will continue to show healthy growth both this year and next, of over 5%.
The Central Bank is also suggesting that 2011 could see a return to marginal positivity in consumer spending patterns and slight improvement in the unemployment rate to around 13.3%.
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