Friday, April 04 11:44:10
The Irish economy will grow by a healthy 2pc this year, helped by increased employment and as confidence returns to businesses, the Central Banks' latest Quarterly Bulletin forecast today.
The pace of recover will pick up again next year with a forecast of 3.2pc growth while this year will see CPI inflation fall to just 0.3pc.
"While different measures of economic activity present contrasting pictures of the performance of the Irish economy, the balance of evidence from a range of indicators signals that the recovery in economic activity is continuing," the Central Bank's Bulletin said.
It identified both jobs and business investment as key drivers of growth this year and beyond.
"The clearest sign of this recovery is provided by labour market data, which indicate that employment has grown strongly over the last five quarters, helping to reduce the unemployment rate to just below 12pc from a peak of over 15pc in early 2012. Initially, the recovery in employment was confined to part-time jobs, however, recent quarters have seen steady growth in fulltime employment, which seems broadly based. Signs of improvement are also visible in investment data, business and consumer survey measures and in more positive retail spending data."
Personal consumption is forecast to grow by 1.1pc this year, compared with a decline of 1.1pc last year, according to the Central Bank's latest projections.
The domestic economy is also set to gain from an increase in investment, which is forecast to grow by 11pc this year, compared with 4.2pc growth last year. Investment had fallen in each of the previous five years, and the Central Bank thinks businesses are re-stocking their capital bases.
This includes a 12pc growth in construction investment, and 10pc growth in plant and machinery.
Even after allowing for investment in aircraft, which has very little impact in the domestic Irish economy, the Central Bank said it believes investment in machinery by Irish companies increased by 23pc last year, though it warns this was from a very low base.
Despite the expected surge in investment, the Central Bank warned it was not enough to return the investment to GDP ratio to more normal levels: at less than 14pc it is well below the long run average an international norm of 20pc of GDP.
On construction, the bank said it expects between 10,000 and 12,000 new house completions this year and next, adding that there is considerable scope for an expansion in residential investment.