Ulster Bank economists revise growth forecast downwards
Economists at Ulster Bank think the economy will grow more slowly this year than they had previously forecast, while ratings agency Standard & Poor's said getting more time to repay bailout loans won't changing our debt rating.
In a new forecast, Ulster Bank's chief economist Simon Barry and economist John Fahey said the economy here will grow by 1.2pc this year – down from the 1.5pc they previously predicted.
It comes as ratings agency Standard & Poor's said the plan to extend the time Ireland and Portugal have been given to repay bailout loans will be positive for both economies.
Standard & Poor's raised its outlook for Portugal to neutral from negative on the news but the plan is not significant enough to change its rating of Irish government debt, it said.
"While extending the maturity of official European borrowing should bolster Ireland's cash flow relief, we believe the stable outlook is balanced by Ireland's still-substantial fiscal deficits, heavy public and private debt burdens and the weaknesses in its financial system," the agency said.
Ulster Bank said it cut the growth forecast for Ireland because of a wider economic slowdown, in particular in the eurozone and UK.
The bank now expects growth of 1.9pc in the economy next year, down from 2.4pc.
Earlier this week, Davy Stockbrokers raised its forecast for expansion in the economy to 1.3pc this year from 0.9pc.
The revisions by Ulster Bank and Davy mean both are now close to the Central Bank's prediction for an economic growth rate for 2013 of 1.3pc.
The Economic and Social Research Institute (ESRI) thinks gross domestic product (GDP) will increase by 1.3pc this year. It thinks GDP could grow by 2.3pc in 2014.
Early warning system
Such economic forecasts are subject to constant revision, but could prove important this year in particular as an early warning system as the Government attempts to emerge from the bailout over the next 10 months.
Even the slower growth Ulster is predicting would see Ireland as the third-fastest growing member of the eurozone. But high levels of debt in the economy and ongoing budget cuts are weighing on a recovery, reports said.
However, the revised forecast anticipates that private sector spending will be a positive contribution to overall growth this year, for the first time since 2007, according to Ulster Bank,
"That would represent an important milestone in the economy's recovery process," Ulster Bank said.