Friday, October 11 11:08:21
Economists at Davy today said that the Irish recovery is gaining momentum and revised up their GDP forecast for next year but said that this year's growth would be slightly weaker that previously forecast.
The brokers' new forecasts for the Irish economy are for 1pc GDP growth in 2013, accelerating to 2.5pc in 2014.
Economist, Conall Mac Coille said he expects employment growth of 1.8pc in 2013 will accelerate to 2.2pc in 2014 so that the unemployment rate falls to 12.8pc next year.
"We forecast that the government will beat its 2013 deficit target by a small amount, at 7.1pc of GDP in 2013 and 4.4pc in 2014," he said.
Official projections for the Irish economy have been revised down sharply in recent months.
Mr Mac Coille said that these downward revisions reflect the Irish economy's poor GDP performance in the first half of 2013, down 1.2pc in the year to Q2 2013 and at face value indicating that the economy is barely emerging from recession.
"However, our view is that measured GDP growth in the first half of 2013 has been pushed down by several temporary factors and that the underlying trends in the economy are encouraging. These temporary factors include the new seasonal pattern of car sales and the impact of the pharmaceutical patent cliff, isolated in a small part of the economy comprising just over 1pc of total employment. Hence, a strong bounce-back in Irish GDP is likely in the second half of 2013."
"Furthermore, Irish employment growth, up 1.8pc in the year to Q2 2013, and other indicators of economic activity paint a very different picture to the GDP data. Nominal wage growth has picked up into positive territory - 1pc in the private sector. Employment in hard-hit domestic sectors such as construction, hotels & restaurants, industry and retail has levelled off or is expanding. PMI surveys for manufacturing and services suggest the recovery is gaining traction with output expanding. Consumer and business confidence have reached their highest levels in many years, and a healthy flow of new FDI projects has continued into 2013. This confidence in the recovery is also evident in foreign investment inflows into both the residential and commercial property markets. Finally, the drag from the fiscal adjustment in 2014 will be smaller than in previous years."
"It is now clear that construction will expand in 2013 for the first time since 2007, one year earlier than we had expected. Industrial output is also slowly picking up, especially in the labour-intensive traditional sector, where activity is now expanding. The emergence of the euro area from recession should help Irish exports and manufacturing to grow at a faster pace in 2014. As activity in construction and industry expands, the recovery in the Irish economy will broaden out, becoming more durable and less reliant on the services sector."