IBEC ups its forecast for economy based on signs of green shoots
Big business representative group IBEC has revised upwards its outlook for the economy based on strong export figures and signs that firms are reinvesting in their businesses.
IBEC expects the economy to grow by 1.5pc in 2011 and 2.8pc in 2012 compared with 1.3pc and 2.3pc respectively in a previous forecast.
Chief economist Fergal O’Brien said that firms are now reinvesting in their businesses and while that has not led to employment growth yet, this is expected to come.
“We’re not saying it will solve the employment problem but things are moving in the right direction.”
The economy in money terms will be €4bn higher by the end of 2012 than we previously expected, he added as this augurs well for Ireland’s ability to reach its agreed deficit reduction targets.
While developments in Europe are still a cause for concern, we also need to focus on the parts of the economy we have control over, he said.
Exports grew by 8pc in the first four months of the year, according to figures today from the Central Statistics Office.
Medical and pharmaceutical products fuelled the growth while more than one half of all of exports went to the Britain and the US.
On a monthly basis, exports remained static in May while the value of imports fell by 24pc.
The seasonally adjusted trade surplus was up 44pc to €3.7bn in May having fallen to €2.6m in April, the lowest positive balance since December 2009.
Economists welcomed the figures but added that they also highlight the ongoing disparity between the domestic and export markets.
“These latest figures are further evidence of the two-tier Irish economy that pertains at present, with a robust export sector on the one hand but a very weak consumer on the other,” said Bloxham Stockbrokers chief economist Alan McQuaid.
“ The bottom line is that the export sector offers the one ray of light at the moment in a still fairly dismal economic picture, and will be the key driver of the Irish recovery story in the short-term.
“All in all, we still think 2011 will be a decent year for Irish exports, with the merchandise trade surplus now forecast to be around €45/46bn compared with €43.5bn in 2010, and leading to another positive contribution from net exports to GDP growth.