Growth forecast raised to 4.8%

Specialist bank Investec Ireland is the latest commentator to up its forecasts for economic growth, saying the core elements of a broad-based recovery remain intact.

In its fourth quarter economic monitor, published yesterday, the investment banking and asset management specialist said it now anticipates the economy — in GDP terms — to grow by 4.8% this year, by 3.5% next year, and 2.9% in 2016. A rise in consumer spending and confidence levels (retail sales up in each of the past eleven months, and consumer sentiment recently hitting its highest level since early 2007) and lowering unemployment levels form the basis of Investec’s positive outlook.

Its latest forecasts are up from GDP growth levels of 2.5%, 2.8%, and 2.5%, respectively for this and the next two years. The revisions are in line with the likes of the Department of Finance and the European Commission.

“All in all, while headline growth estimates for Ireland can be distorted by sector-specific factors, an examination of key data points, across the economy, confirms that the core narrative of a broad recovery, that we have previously provided, remains intact,” according to Investec’s chief economist, Philip O’Sullivan.

“Recent data confirm that a broad recovery is underway. Irish GDP expanded by 5.8%, year-on-year, in the first half of 2014. While net exports remain a significant driver of growth, the domestic economy has seen a meaningful upturn this year.

“The broad nature of the recovery is illustrated by the fact that all three PMI’s [purchasing managers’ indexes] for Ireland — the manufacturing and services PMIs compiled by Investec and the Ulster Bank Construction PMI — have been simultaneously above 50 since September 2013.”

On exports, Investec has upped its growth outlook from 4% to 8.5% and said it expected imports to increase from 3.5% to 8.9%, this year.

On consumer spending, it now foresees growth of 1.7%, rather than 1.4%, on the back of recently-noted positive retail trends.

Having already lowered to 1.6%, Investec expects continued improvement in long-term yields/interest rates connected to Irish government debt/bonds, saying they should “converge further towards ‘core’ eurozone levels over the coming year”.

The bank did, however, warn risks to economic growth remain, mainly via weak prospects for the broader eurozone economy and high unemployment and household debt levels.


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