Budget to blame as Ulster cuts its forecast for growth
ULSTER Bank has halved its forecasts for growth in the Irish economy, blaming the effect budget measures will have on consumer spending while warning that employment will fall again this year.
In its latest Irish Economic Outlook, the bank more than halved its forecasts for gross domestic product (GDP) growth this year to 1.2pc from 2.5 to 3pc previously.
Gross national product (GNP), which excludes contributions from foreign companies based in Ireland, will be weaker as well at 0.1pc.
Exports, which are growing at the fastest rate in a decade, are beginning to drive job creation here although domestic demand is expected to fall again in 2011. That will be the fourth consecutive drop.
Employment is expected to fall by 1.2pc this year, which has been seen as a sign of stabilisation following a 4pc drop last year.
"The beginnings of a recovery in domestic demand in 2012 should help foster some modest employment gains next year of 0.5pc.
"However, this outlook is likely to result in rather modest downward pressure on the unemployment rate which we expect to average 13.2pc and 12.6pc in 2011 and 2012 respectively, from 13.3pc in 2010," the report said.
For 2010 as a whole, the firm believes the economy contracted by 0.3pc after the 7.6pc collapse in 2009, indicating that relative stability returned to the economy last year.
GNP is estimated to have fallen by 2.1pc last year, albeit at a much slower pace of decline compared to 2009 when it fell by 10.7pc.
Despite the expected rise in GDP, the absence of a corresponding recovery in domestic demand means the early stages of this recovery will "lack a feel-good factor for most households and domestic-facing businesses" but demand may begin to stabilise later this year.
It will be 2012, however before business and consumer spending returns to annual growth.