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EU see Irish GDP growth at 1.1pc in 13

Friday, February 22 15:32:20

Ireland's economy will grow at a rate of 1.1pc this year in GDP terms, the European Commission predicted today - unchanged since its last forecast.

However, it has also revised upward its estimate for 2012 growth from 0.4pc to 0.7pc.

It said Irish growth last year was stronger than expected, and was more broad based than net exports, with investment and private consumption also showing growth.

It said high frequency indicators, such as tax collections, retail sales, unemployment, property prices and purchasing managers indices all point to what it called a ''relatively resilient performance'' by the Irish economy.

It noted that market yields on Government bonds have fallen to their lowest level since April 2010, particularly after the liquidation of IBRC and the deal on the promissory notes.

That deal should improve the fiscal balance by 0.1pc of GDP this year and 0.7pc next year - excluding possible costs to the Government of any shortfall from the sale of IBRC assets by the liquidator. The fall in sovereign borrowing costs has also led to falling yields on bank bonds, and the Commission said the recent sale of unguaranteed bonds by Bank of Ireland and AIB, and the Government's sale of convertible contingent debt in Bank of Ireland underscored what it called quickly improving market sentiment.

It said household deleveraging may moderate slightly this year, which could help to improve prospects for personal consumption. But it added that a lasting revival of the domestic economy is crucially dependent on resolution of non-performing loans.

The Commission said the Government's deficit will be 7.3pc this year, falling to 4.2pc next year. That is better than the target figures for Budget 2013 in both cases. However Ireland continues to have one of the highest Government deficits in the EU and the euro zone, where the deficit is projected at 2.7pc this year.