THE Irish economy was almost stagnant last year and will barely grow in 2013, according to new research.
Those figures are in stark contrast to the Government's expectations and are lower than marks put forward by the International Monetary Fund, European Commission and the Economic and Social Research Institute (ESRI).
At the time of December's Budget, the Government estimated that GDP grew by 0.9pc in 2012 and would grow by 1.5pc in 2013.
Even the commission, which has been the most bearish on Irish growth for some time, is predicting a 0.4pc gain in 2012 and 1.1pc in 2013.
Merrill's bearish analysis extends into the eurozone, with the economy in the area expected to shrink 0.4pc this year.
The US will slow slightly, but Chinese GDP will grow sharply by 8.1pc this year.
Despite the bleak forecast domestically, Merrill Lynch is broadly positive on the global economy this year.
Johannes Jooste – Merrill Lynch Wealth Management's chief market strategist for Europe, Middle East and Africa – said he expected investors to begin to shift capital away from bonds and other fixed-income products into equities on a much bigger scale than at any time since the crisis began.
"Growth should begin taking over from policy as the key focus for investors this year," he said. "This leads us to favour equities over bonds in 2013.
"The notable valuation gap between the two asset classes, now at its most favourable level for stocks in over 25 years, adds to our conviction here."
He said the expected strong performance by Angela Merkel's CDU-CSU coalition at next autumn's federal elections in Germany would be "positive" for the eurozone.
However, he added that there was a risk of more volatility if Spain "continues to resist" pressure to seek a full bailout or if the Italian election failed to deliver a clear winner.
Merrill's forecasts came even as Goodbody Stockbrokers raised its estimates for Irish growth this year, citing improved domestic demand.
The firm now says the economy will grow 1.6pc in 2013, up from 1.3pc, and will add 2.6pc in 2014, up from 2.4pc previously.