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Ulster Bank today revised up its economic forecast for the
year, forecasting that Irish GDP (gross domestic product) will
grow 1% in 2010. Gross national product (GNP), which includes an adjustment for
outflows such as multinational profits, will contract 0.4% compared with a fall
of 1.2% previously predicted.
The bank says a surge in the output and exports of the Irish
multinational sector was a major driver of the return to positive quarterly GDP
growth in the first quarter of this year. But it says, encouragingly recent
quarters have witnessed emerging evidence of modest improvement beyond the
activities of multi-national firms.
Overall, despite evidence of slowing growth in advanced
economies, Ulster is projecting average GDP growth in 2011 of around 3%.
Nonetheless, it says the downside risks facing the international outlook have
risen lately, and these will require very careful watching as without the
critical support from external demand, it is very difficult to see the Irish
recovery staying on track.
Consumer spending is expected to record a
positive second quarter as car sales and other sales volumes grew in the first
half of the year.
The
Economic Outlook report
published today says the labour
market is set weaken further in the short term: employment probably has further
to fall, though at a reduced pace compared with heretofore, while the
unemployment rate is set to peak between 13.5 and 14% later this year, from
12.9% in Q1.
Economist Simon Barry says while the underlying fiscal situation
looks to be unfolding in line with expectations, the same cannot be said of
estimates of the budgetary cost of recapitalising the banking sector which have
continued to ratchet higher. This is particularly so in the case of Anglo-Irish
Bank which on some recent official estimates could end up costing the State some
€25bn, and possibly more on the more pessimistic estimates of some private
sector analysts.
Barry says the extremely large costs involved, as well as ongoing
uncertainty about what the true final cost will ultimately amount to, are
weighing heavily on investor sentiment in Irish government bond markets where
spreads relative to Germany have widened out to new crisis highs in recent days
