Stockbroker Davy has predicted that GDP growth in Ireland will slow sharply as a euro area double dip recession looms. In a report on the Irish economy, it has revised sharply downwards its projections for GDP to 0.4% this year from 1.7%.
It also predicts that GNP will contract by 0.4% this year compared to its previous predictions of growth of 1% as uncertainty surrounding the European debt crisis has led to a collapse in confidence.
In its forecast for this year, Davy says it expects export growth to fall from 4.5% in 2011 to 2.8% in 2012, despite gains in competitiveness. It sees employment falling by 0.4% in 2012, picking up gradually in 2013.
Davy chief economist Conall Mac Coille says that with households and companies postponing spending, a double dip euro area recession appears the most likely outcome. But he adds that the impact of the recession on Irish economic growth may be less severe than in other European countries as Irish households and businesses have already adjusted their spending following the collapse in confidence in 2010.
Davy also says the Government's fiscal planning needs to factor in the possibility of less favourable economic scenarios than previously thought, and says policy efforts to reduce the cost of recapitalising the Irish banks are ''appropriate''.
