Central Bank issues downbeat growth forecast
The Central Bank has today revised down its expectations for economic growth for both this year and next.
In its latest bulletin, the value of business in Ireland, including the multinationals measured by Gross Domestic Product (GDP), is forecast to grow by 0.5% this year before jumping to 1.7% next year.
The analysis is a drop of 0.2% for both years, when compared to the bank’s summer report.
The Central Bank blamed Ireland’s vulnerability to an international economic slowdown for the impact on business at home.
It said: “The undershoot in Irish GDP since the beginning of the (bailout) programme is broadly comparable to what has occurred in the rest of the euro area and is largely a result of the weaker external environment.”
The review has also forecast unemployment will fall to 14.5% next year.
Similar to the worse-than-forecast GDP figures – the value of Irish-owned business measured by Gross National Product (GNP) is expected to contract by 0.4% this year before jumping to 0.7% growth next year.
In its wider assessment of the economy and hopes for sustained recovery, the Central Bank said more needs to be done to drive down labour costs and reinforce competitiveness.
“One important way to do this would be to press ahead with public sector reforms to deliver the maximum possible level of public services from the reduced resources available for expenditure,” the report said.
“More generally, pay remains high in both the public and private sectors, adding to costs and prices in the economy, and no doubt discouraging expansion and investment projects by exporting firms.”
It added: “This would make clear that the economy is capable of adapting to changed circumstances and would be very beneficial to the recovery process.”
The Central Bank also examined Ireland’s moves back into the international money markets for the first time since the bailout almost two years ago.
It noted that sentiment improved significantly over the summer following the European Council June summit and the subsequent statement that Europe was committed to splitting bank debt from sovereign debt.