Bank of Ireland has upped its growth forecasts for the economy by more than 2% for this year.
The bank feels even more bullish about the economy than both the Department of Finance and the Central Bank, which also recently significantly upped their forecasts. In its latest outlook, published yesterday, Bank of Ireland said it expects GDP to grow by 5% this year and by 4.2% in 2015.
Those predictions are up from BoI’s previous estimates of 2.8% for this year and 3.4% for next which were made in July.
“GDP increased by 3.8%, year-on-year, in the first quarter, with the rate of growth picking up to 7.7% in the second. While the latter likely overstates the underlying strength of the economy, it points to strong momentum and a recovery that is gaining ground,” the bank said.
Its 2015 forecast, of 4.2% GDP growth, is partly based on last week’s slightly friendlier budget, which called for a €1bn adjustment for next year, rather than the previously anticipated €2bn stimulus.
“Exports next year are expected to benefit from relatively strong growth in the US and the UK, and from the recent decline in the euro, though the weakness of the euro-area economy is a concern,” the bank said.
It added: “Investment is forecast to increase at a double-digit pace as demand picks up further, while ongoing employment gains, modest earnings growth and the measures announced in the budget should support household disposable incomes and stronger consumer spending – albeit balance sheet repair is still continuing and will remain a headwind.”
On inflation, Bank of Ireland expects the rate to remain relatively low, “given the spare capacity in the economy”. Regarding unemployment, however, it expects the average percentage rate to fall to around 11.3% this year and to 10% next year.In his Budget speech, Finance Minister Michael Noonan said the Government is now anticipating GDP growth of 4.7% this year and 3.6% growth in 2015, having previously set respective growth targets of 2.1% and 2.7%.
The Central Bank recently upped its 2014 GDP growth outlook from 2.5% to 4.5%. Employers’ representative, Ibec still remains the most bullish commentator, now expecting the Irish economy to grow – in GDP terms – by over 6% this year. However, Bank of Ireland did warn that risks to its forecasts still exist.
“At the current juncture, downside risks relating to the weakness of the euro area economy and increased market volatility are especially prevalent. On the upside, given the strong data for the first half of the year, there may be more momentum in the economy than built into our forecasts, while investment could rise by more than projected given its still low share in GDP.”
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