Thursday 21 November 2019

Ulster Bank upgrades growth forecast for this year to 5.2pc and 4.5pc for next year

Simon Barry, Ulster Bank Senior Economist
Simon Barry, Ulster Bank Senior Economist

Colm Kelpie

Ulster Bank has become the latest organisation to dramatically upgrade its growth forecast for Ireland this year.

It is forecasting GDP to rise 5.2pc - up from its 3.9pc prediction as recently as April.

Growth in 2016 is expected to hit 4.5pc, which is an improvement on the earlier 3.6pc rise.

Ulster Bank said the upgraded growth outlook is related to several factors, including upwards revisions to previous estimates of 2014 GDP growth, the strength of growth in the first three months of the year, and the supporter effects of a weaker euro.

Simon Barry, chief economist at Ulster Bank, said the strengthening recovery is clearly evident in the public finances, which were 3.5pc ahead of target in the year to July.

"The better economic and fiscal performance leaves room for a further modest stimulus in Budget 2016," Mr Barry said.

"We think there is merit in using at least some of the additional fiscal space to boost government capital spending relative to existing plans.

"While the Eurozone economy has surprised positively in recent quarters, international risks, including those posed by China, and emerging markets more generally, Grexit and Brexit, are skewed to the downside."

Mr Barry said China, and its slowing economy, is now the key near-term risk for the global economy. But he said Ireland's exposure to China is low, at just 2pc of total exports.

"But Ireland would be vulnerable to any severe sustained deterioration in global financial conditions that jeopardized the outlook for its key trading partners, ie the Eurozone, US and UK," he said.

Earlier this month, Goodbody Stockbrokers upgraded its growth forecasts for the year to 5.5pc, from a previous forecast of 4.3pc.

It said Ireland is experiencing its most promising economic expansion since the 1990s.

The overall size of the economy here has now exceeded the pre-crash peak of 2007, the Central Statistics Office (CSO) has said, although population growth means economic activity per head remains less than it was in the boom.

Last year, GDP rose by 5.2pc, significantly more than initially thought, the CSO said.

It was enough to take the overall economy back to the previous peak in 2007.

The better than expected figures reflected increases in both the level and the rate of growth, but changes to the way the size of the economy is calculated.

This includes adding the value of aircraft owned by leasing firms based here, which had an impact on tallies for last year.

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