Economic growth expected to continue at same rate
Economic growth will continue at 6% this year and on into 2007, one of the country’s leading economists predicted today.
In his quarterly economic outlook, Bank of Ireland chief economist Dr Dan McLaughlin said inflation would average out at 3.5% despite higher mortgage and energy costs.
And with an estimated tax take of €1.5bn creating an Exchequer surplus of €0.8bn, Dr McLaughlin said the Government would be in a position to deliver another expansionary budget for 2007.
“The combination of strong economic growth and rising property values will result in a €1.5bn tax windfall for the authorities, leading to a €0.8bn general government surplus, as opposed to the €1bn deficit forecast in the Budget,” he said.
“This will allow the Government to deliver another expansionary budget for 2007, which alongside a further SSIA impact will help to offset the impact of higher interest rates. Consequently, we see another 6% expansion for GDP in 2007.”
Consumer spending picked up momentum through 2005, Dr McLaughlin noted in the outlook, ending the year with real growth in excess of 6%, and he predicted an 8% increase in 2006.
“Household income is again likely to be the key driver, underpinned by employment growth of 4%, and Ireland’s relatively high savings ratio is likely to fall somewhat as the SSIA accounts begin to mature,” he said.
“The latter depressed consumption for five years so it is reasonable to expect some corresponding spending boost over the next few years.”
The bank also forecast employment growth of a further 4%.
Dr McLaughlin noted that exports have picked up momentum however since 2005 and should benefit from the recovery in euro zone activity therefore acting as less of a drag on the economy in 2006.
“Therefore we reiterate our 6% GDP growth forecast, as the High Street spending boom we forecast has clearly materialised,” he added.
