Employers cut growth forecast to 1.3pc as spending drops
EMPLOYERS group IBEC has cut its growth expectations for 2011 due to a lack of consumer spending.
In its latest quarterly economic outlook, it reduced its forecast to 1.3pc from 1.7pc.
Last week the IMF and the Central Bank also trimmed their forecasts for GDP growth this year because of falling demand.
"The outlook for GDP growth in 2011 has weakened somewhat since our last forecasts, largely on the back of a deteriorating consumer situation. Our GDP growth forecast is 1.3pc, while GNP will remain largely flat," IBEC's chief economist Fergal O'Brien said.
He said that while the business environment remained weak, order books were very strong for exporters and he expects export growth to average 6pc this year.
"Expenditure on plant and machinery should increase by about 10pc."
Mr O'Brien said latest information suggests consumer spending will be down by about 1.5pc, a little worse than expected earlier in the year.
"Higher than expected inflation, continued labour market weakness, and ECB interest rate increases are the main reasons for the downward revision."
IBEC believes the upcoming jobs budget reflects an important opportunity to demonstrate that Ireland is open for business.
"Businesses and consumers desperately need a confidence boost from the upcoming jobs initiative. The Government should look at some of the measures in the recent UK budget, which delivered some optimism for businesses despite a similarly difficult public finance situation," Mr O'Brien said,
He called on the coalition to examine its commitment to reversing the minimum wage cut, claiming this would undermine proposed positive initiatives and fly in the face of the labour costs challenge still facing the country.
"We have continued to make this case to both the new Government and the EC/IMF/ECB,'' he added.