The Governor of the Central Bank, John Hurley, has predicted that a recovery in the euro area will not begin to gather pace until early 2004. He said that US growth is weak, but that it is better off than in the euro area, where economic performance remains weak.
At the publication of the Central Bank's annual report for 2002 this afternoon, Hurley said the Irish economy was performing well in a difficult environment, but he revised downward the forecast GNP growth to about 1.5% from 1.75%. GDP was revised downwards to 2.75% from 3.75%. This revision reflects the postponement of a global recovery, the bank said.
Hurley said that even though the economy has performed relatively well, there are still a number of significant risks to the resumption of trend growth.
'Apart from the weak international economy, there are issues of deteriorating competitiveness driven by domestic inflation and a rapidly appreciating euro', he said. 'The threats to competitiveness have become more stark, with the Irish price level currently estimated to be some 12% higher than that of the euro area as a whole.'
'Although our inflation rate by year-end may be less than 3%, it is still likely to be twice that of the euro area. This underlines the need to continue to focus domestic policies on promoting competitiveness,' he added.
Hurley reiterated the Central Bank's concern about the high levels of mortgage credit growth saying there was little improvement in the year, with the increase continuing to run at 24%.
The Central Bank's profits for 2002 amounted to €829m, an increase of €266m over 2001, arising from the write-off of unredeemed Irish pound banknotes.
