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C Bank forecast growth but debt weighs

Wednesday, January 29 11:42:34

The Central Bank this morning published its latest Quarterly Review, which forecast a GAP growth rate of 2.1pc for this year but warned that State and private debt remains a major drag on the recovery.

It forecast that consumer spending will rise by 1pc this year after falling significantly over the past number of years while export levels will grow by 3.5pc after last year's weak 0.3pc growth.

Inflation will remain low at just 0.4pc, it forecast.

The unemployment rate will fall to 11.9pc compared to 2013's 13.2pc and the 2012 jobless rate of 14.6pc.

The review said that further progress in terms of policy implementation across a range of areas is required before Ireland can be considered to have recovered from the crisis fully with the need for further fiscal consolidation, restoring banking soundness and sustaining the rebound in employment growth through improvements in competitiveness essential, it said.

"While much has been achieved, creating the conditions for a sustainable economic recovery will require further reductions in the level of debt in the economy, both public and private, returning the banking system to a position where it can support the economy with adequate lending, and getting the rate of employment well up from the low level to which it had fallen in the crisis," it said.

It added that, to ensure that these challenges are overcome, continued adherence to the policies that were in place during the bailout programme remains essential.

On the fiscal front, the report said that the debt-to-GDP ratio has peaked and at a slightly lower level than previously expected.

"While these are welcome developments, deficit and debt levels remain very high and further consolidation is needed in coming years to put debt firmly on a downward path and secure sustainability," the Central Bank said.

"Through reducing uncertainty, this should contribute to a faster and more lasting recovery and also reinforce the confidence of international lenders and further improve access to market funding."