Exports brighten economic outlook
Thursday, 15 October 2009 14:38
Goodbody Stockbrokers has again revised upwards its forecast for the Irish economy. In its quarterly economic report published today, Goodbody predicts that the economy will shrink by 1.1% next year, and that it will grow by 2.4% in 2011.
The 1.1% figure is the same as that predicted by the ESRI earlier this week.
Previously the stockbroker had forecast that the economy would shrink by 3.7% next year, and grow by only 1.2% the following year.
Economist Dermot O'Leary says he is now more confident of a speedy recovery in economic growth because exports are set to improve. He says that high private sector debt levels are of greater concern in the medium term for the Irish economy than public sector debt.
'Given that Ireland is one of the most indebted economies in the developed world, we have benefited most from the collapse in interest rates, which we have quantified at around 5% of GNP,' Mr O'Leary says. But he adds that this benefit will not be repeated and will instead act as a drag on businesses and consumers going into 2011 in particular as the impact of interest rate rises is felt.
He says household debt levels have peaked at 175% of disposable income, but that Irish households are better able to sustain higher debt levels due to the younger population and low interest rates.
He says the budget deficit is likely to remain high and warned that the Government is unlikely to reach its target of hitting the 3% of GDP deficit by 2013. Mr O'Leary adds that risks remain but the outlook has brightened considerably.
