Merrill Lynch: confidence still 'uncertain'
IRELAND will be able to grow its economy next year despite sharp spending cuts, but restoring confidence in the country is a "much more uncertain" prospect, Bank of America Merrill Lynch said yesterday.
The comments from BOA Merrill Lynch senior European economist Silvia Ardgana came as the bank launched its global outlook for 2011, which included a 1.6pc growth rate for Ireland's economy next year.
The forecasts is marginally behind the 1.75pc included in the Government's four-year plan, but is one of the most positive international assessments of Ireland's prospects.
"Recent data from Ireland has been pointing in the right direction," Ms Ardgana said, explaining BOA Merrill Lynch's "positive" stance on Ireland.
"Industrial production is increasing. Unit labour costs are down. All these indicators suggest growth next year improving."
The economist also voiced confidence that Ireland would be able to withstand the harsh cuts in the four-year plan, since they would essentially see spending return to pre-crisis levels.
Ms Ardgana stressed, however, that the positive outlook for Ireland would not necessarily clear the way for the country to return to the debt markets and borrow money more cheaply than the 5.7pc on offer from our bailout.
"It's much more uncertain [when Ireland can return to the bond market]," she said. "Having a positive outlook in terms of growth and having confidence return in the market is a very different thing."
That confidence may begin to return towards the second half of the year as economic growth numbers begin flowing through, but Ms Ardgana warned that threats remain.
"The short-term risks are that the banks could need more money and that the peak of debt to GDP (Gross Domestic Product/output) could rise," she said.
"I tend to see the glass half full rather than half empty. . . The fact is that Ireland is a very flexible economy."