The Irish economy recovered in the second quarter, having contracted in each of the previous three quarters, with real GDP rising by 0.4% from Q1. Exports rebounded strongly, following a large fall in the first quarter, and consumer spending rose, having weakened in the opening months of the year, while the most recent data suggest both increased again in Q3. We now expect GDP growth of 0.4% for 2013 as a whole, a marginal upward revision from our previous forecast (0.0%) and broadly in line with last year’s outturn of 0.2%, according to Bank of Ireland’s Quarterly Economic Outlook published today, 31st October 2013.
According to Michael Crowley, Senior Economist, Bank of Ireland and author of the publication: “GDP growth is forecast to strengthen to almost 2% in 2014, reflecting some positive developments recently. One relates to the prospects for exports, which have improved given the pickup in activity in Ireland’s main trading partners. Growth abroad is forecast to strengthen further next year, thus boosting exports which we expect to increase by 3.5%. Imports are also likely to pick up, but net exports are forecast to make a positive contribution to growth.
“Another positive development has been the stronger than expected increase in employment over the first half of this year. The numbers employed rose by almost 20k, or 1%, while the downward trend in the Live Register and the fall in the unemployment rate suggest employment increased further in the third quarter. Rising employment together with some modest pickup in earnings growth will boost personal disposable incomes and thereby support consumer spending, which we expect to increase by just over 1% in real terms next year.
“The €2.5bn adjustment announced in Budget 2014 will have a dampening effect on economic activity. However, we still expect domestic demand to increase by more than 1%, with a strengthening of investment together with the increase in consumer spending more than offsetting another fall in government spending” concluded Michael Crowley.