Bank of Ireland has cut its growth expectations for 2011 because the economy started the year in a weaker state than most expected.
In its latest quarterly economic outlook today, the bank said it was revising downwards its GDP growth forecast for the year to a modest 0.5%.
Bank of Ireland's group chief economist, Dan McLaughlin, said two surprising and unwelcome pieces of economic data have been revealed recently. The first was that the unemployment rate over the past six months has been much higher than previously published.
The second piece of weak data showed that nominal GDP fell by a massive 6.6% in just three months. The decline in real GDP was also a substantial 1.6% due to falling exports, today's report notes.
The economist said that employment fell by an average 4.2% in 2010, following an 8.2% plunge in 2009. He said the pace of redundancies did slow sharply in the last few months of 2010, but picked up marginally again this year.
'We expect a further fall in employment in 2011, albeit at a slower pace of 1.5%, equivalent to an average jobs loss figure of 28,000,' the economist said. He added that the unemployment rate is set to average 14.4%, which implies a steady but modest fall from the current 14.7% over the coming months.
Mr McLaughlin said the bank predicts that exports will grow by a slightly slower pace than last year, but imports will pick up to 7.5%.
He also said that the recent increase in oil prices presents a clear downside risk to world economic growth. Rising ECB rates will also result in higher Irish inflation than previously expected.
