Tuesday, January 29 11:22:52
The Central Bank this morning cut its growth forecast for this year in terns of GDP to 1.3pc compared to an earlier forecast of 1.7pc, citing a slowdown in the economies of our main export markets.
Its first quarterly bulletin of the year said that for 2012 as a whole, real GDP is estimated to have increased by about 0.7pc.
A projected pick-up in GDP growth to about 1.3pc in 2013 and to about 2.5pc in 2014 reflects the expectation of a gradual stabilisation in activity in the domestic economy and a recovery in external demand next year. These projections are subject to significant risk, mostly related to external demand, which is likely to remain the main driver of growth, the report said.
It also noted clear signs of stabilisation in the domestic economy.
Estimated GNP growth for 2012, at 1.5pc, has been revised upwards significantly compared to the last Bulletin, reflecting a much lower than expected increase in net factor income1 outflows. A return to a more usual trend in net factor income flows in 2013 should see GNP growth moderating to about 0.5pc before picking up again to about 1.4pc in 2014, it said.
The Bulletin said that while employment growth is small, it is the first projected growth since 2007 will all new jobs coming from the private sector.
The bank warned that due to Ireland's high dependence on exports, further progress is needed to reduce costs in the economy to improve competitiveness and increase flexibility, especially in the public sector.
It also said the Government should not be tempted to ease back on its budget adjustment plans because last year's deficit was smaller than anticipated. It said it should use the ground gained to reach a 3pc deficit faster than planned.
The bank said this will reduce uncertainty, contribute to domestic growth and reduce Government borrowing costs.
The Central Bank said investment by business is expected to pick up again this year, building on a return to investment growth seen last year, which happened sooner than expected.
It also foresees a modest return to construction growth next year. Based on recent figures from the Central Statistics Office it said there is "tentative reason to expect that the low point in investment may have been reached".
The Central Bank said it expects a further decline in consumer spending this year, but at a much more moderate pace. It has projected a fall in consumer spending of 0.4pc this year, and slight growth of 0.2pc next year as international conditions improve.