Central Bank revises up 2011 forecasts but warns that value of Irish businesses will fall
The Central Bank has forecast the economy will grow at 1pc this year but the value of Irish-owned business will fall again.
The state's economic advisors have steadily revised up their figures to levels first suggested at the start of the year following fears of double-dip recession earlier in the summer.
But the homegrown economy is still lagging behind with its value to fall by 0.4pc this year.
The Bank's latest quarterly bulletin said it was offering a more modest rate of economic expansion for next year than previously forecast.
It estimates that next year Gross Domestic Product (GDP), which includes the value of multinationals, will enjoy stronger growth of 1.8pc. Irish-owned companies, as measured by Gross National Product, is expected to rise by 0.7pc.
The fall in homegrown enterprise compares to growth of 0.3pc last year and severe contraction of 9.8pc in 2009 and 2.8pc in 2008.
On the jobs front the Central Bank is forecasting the unemployment crisis will peak this year at 14.2pc before edging back slightly to 14pc by the end of next year.
The report said the precise economic outturn for 2011 will determine how much money the Government cuts and saves in Budget 2012.
Speculation has centred on a savings figure anywhere from three to four billion euro.
"It is difficult to say at this stage whether this will be the €3.6bn adjustment currently projected under the EU-IMF programme, or whether a larger adjustment will be needed to achieve this target," the report said.
The Central Bank also put forward the case for making some of the savings planned for future years in this year's budget.
It said households are already making plans when making savings and consumption decisions.
"This argument should not be taken too far, however, and it would not be advisable, for example, to frontload the adjustment in a dramatic manner," the report said.
The Central Bank said there may be some decline in the overall burden of the adjustment if it is achieved more rapidly.
The report also called for adjustments in competitiveness to be further reinforced and for the Government to press ahead with public sector reform to deliver the maximum possible level of services from reduced resources.
"Many of the changes required involve difficult adjustments but they will not only increase the underlying resilience of the economy, but act as a powerful signal that the economy is capable of adapting to changed circumstances and, as a result, has the capacity to work itself out of its current challenging situation," the report said.
"An increase in such confidence, provided that it is solidly based on tangible progress, would, in itself, be beneficial to the recovery process."