Goodbody Stockbrokers has predicted that the economy will shrink by 1.1% next year, and that it will grow by 2.4% in 2011.
Previously the brokers had forecast that the economy would shrink by 3.7% next year, and only grow by 1.2% the following year.
Economist Dermot O'Leary said he is now more confident of a speedy recovery in economic growth because he predicts an improvement in exports.
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,’ Mr O’Leary said.
He said this benefit will not be repeated and will instead be a drag on businesses and consumers in 2011 in particular as the impact of interest rate rises is felt.
Mr O’Leary said 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.
He added that risks remain but the outlook has brightened considerably.
