The Department of Finance is expected to lower its growth forecast for the economy from 1% to closer to 0.6% following downgrades by the European Commission and IMF and a number of commentators.
The latest downgrade of GDP growth came yesterday from Bloxham Stockbrokers chief economist, Alan McQuaid in the brokers’ March 2012 Irish Quarterly Economic Outlook.
Mr McQuaid said there is little to be optimistic about as regards Irish consumer or personal spending in the immediate future and thinks it is too early to make judgements on overall budget targets for this year.
“Whatever happens in the coming months, we certainly wouldn’t be advocating the Government implementing more fiscal austerity if the deficit targets set out for 2012 don’t look like being achieved,” he stressed. “Further austerity than is absolutely necessary would send the economy backwards instead of forwards as required.”
Mr McQuaid said the signals coming from the world economy remain mixed with the vast US services sector growing at its fastest pace in a year in February, contrasting with signs of recession in Europe.
“The improving economic picture in the US is a promising development for Ireland but the overall uncertainty over the world economy and Euroland in particular, is likely to weigh negatively on the country’s growth prospects this year.
“Ireland’s economic recovery will slow in 2012 as a result of weakening export demand. We are now projecting real GDP growth of 0.5% compared with our previous forecast of 1.1% at the beginning of the year, and with the risks still clearly tilted to the downside at this stage given the uncertain global backdrop and the outcome of the upcoming referendum on the EU fiscal treaty,” he told investors.
Mr McQuaid believes the export sector will be the key driver of Ireland’s economic recovery in the short-term.
“We believe that, as was the case during the 2009 collapse in global trade flows, the sectoral composition of external demand will shift in favour of goods which Ireland specialises in, especially the likes of pharmaceuticals. As well as that, export activity looks set to be supported by ongoing competitiveness gains.”
He said the labour market situation remains a major cause for concern, with little sign of any underlying improvement as regards job opportunities here at home.
“In our opinion it is going to be a very slow process as regards tackling the huge unemployment problem, and it will be a number of years before the jobless rate falls back into single digits.
“Our latest projections have the unemployment rate falling to 14.0% on average in 2012 and then to 13.5% in 2013 from 14.4% in 2011,” he said.
* Department of Finance +1%.
* AIB +0.9%.
* ESRI +0.9%.
* Central Bank +0.8%.
* European Commission +0.5%.
* Bloxham +0.5%.
* IMF +0.5%.
* Ulster Bank +0.4%.
* Average +0.7% .
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