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Economy hopes of growth

ECONOMIST Peter Bacon delivered a savage assessment of Ireland's recovery prospects, warning that growth could be as little as 0.5pc for the next three years.

The leading economic analyst said that Irish firms borrowing money would ultimately end up paying interest rates that were linked to the cost of Irish Government borrowings.

"You can call it yourself as to where the risk premium on Government bonds is going to go -- where it goes there goes general interest rates for companies in Ireland," Dr Bacon (left) said.

"In the long term, the cost of finance will be 200 or 300 basis points above the cost of Government borrowings."

Bloxham is still predicting an expansion of 2.5pc next year, while fellow broker Davy is pencilling in growth of 2.7pc and Ulster Bank is expecting growth of about 3pc.

Dr Bacon has admitted that his predictions are more severe than many of his other commentators.

"There are two factors that make me more pessimistic than the consensus," said Dr Bacon.

"The first is I think households are going to be more cautious about spending than is assumed in some forecasts."

"The second is I think the interest rate consequence of international certainty is going to be a deterrent to investment taking place," he added.