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Goodbody downgrade Irish growth forecast

Wednesday, September 26 11:46:47

Economists at Goodbody's this morning downgraded its forecasts for Irish economic growth, citing the still fragile nature of the "economic recovery".

Following weaker than expected Q2 employment and GDP data we are downgrading our Irish GDP forecasts for the first time this year by c.0.5pc for both 2012 (to 0.3pc) and 2013 (to 1.3pc).

Weaker domestic demand is the main driver of the 2012 downgrade, while a combination of lower export growth and lower consumption contributes to the downgrade for 2013, it said.

The Irish government is likely to follow suit with its own downgrades., it said.

"A more positive aspect of the recent trends is the increase in the GDP deflator as a result of an improvement in the terms of trade. This means that nominal GDP is growing faster than real GDP and, as a result, our deficit and debt forecasts remain relatively unchanged. "

" As we suggested in our note on September 5th, the October deadline to agree a deal on a re-engineering of Ireland's bank debt is too ambitious (especially after last night's statement from Germany, the Netherlands and Finland, see our morning comment on this issue). While timing is not that important from a debt sustainability perspective, we believe agreement on a restructuring of the promissory notes is required to ease some political tensions ahead of Budget 2013 in December."