Ireland will have to wait until next year to see sustainable levels of economic growth, with any GDP rise of over 2% unlikely until 2015, professional services giant Ernst & Young has forecast.
In its latest eurozone forecast, published yesterday, Ernst & Young — traditionally one of the more pessimistic readers of the Irish economy in recent times — has lowered its outlook for 2013 GDP growth here from 1% to 0.1%.
However, it said Ireland should start to see sustainable growth of 1.9% in 2014, accelerating to 2.5% in 2015.
Just two months ago, employers’ representative, Ibec said 2013 should mark a turning point for the domestic economy, with the unemployment rate stabilising and GDP growing by nearly 2%. Similarly, the latest Department of Finance outlook is for the economy to grow by 1.5% this year.
However, Ernst & Young — which also sees a 0.5% GDP fall in the wider eurozone economy this year, to be followed by sluggish growth of 1.1% in 2014 — thinks consumer spending in Ireland will fall by nearly 2% this year, followed by marginal growth next year. Spending, it says, will continue to be hampered by a weak labour market, as well as the tax hikes and spending cuts announced in December’s budget.
That said, Marie Diron — the senior economic adviser to the E&Y forecast — said this week’s successful NTMA 10-year bond auction marks “very good news” for the Irish economy.
“It is further evidence of investors’ confidence in the sustainability of public finances and cements Ireland’s restored access to financial markets. Similarly successful bond sales would encourage rating agencies to upgrade Ireland’s credit rating. Achievements such as this is one of the main factors behind our forecast of a return to solid growth from 2014 onwards,” she added.
The NTMA said yesterday that it may issue more debt this year, following the successful €5bn bond issue on Wednesday that covered most of the country’s funding needs for 2013.
Ernst & Young Ireland’s managing partner Mike McKerr said that the ranking of Ireland in sixth place in his company’s recent globalisation report — in terms of trade — and first in terms of openness and ease of trading — along with increased export competitiveness and improvements in our public finances — “suggest that Ireland is likely to return to sustainable growth in the medium term”.
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