A leading stockbroker yesterday more than doubled its forecast for Irish economic growth following positive news on the domestic and global fronts.
In a cautiously optimistic report on the economy, Davy Stockbrokers' chief economist, Mr Robbie Kelleher, said Irish gross national product (GNP) was likely to reach 1.7 per cent this year. His previous forecasts had pegged GNP expansion at 0.8 per cent. He said GNP would rise by 2 per cent next year, compared with an earlier prediction of 1.4 per cent.
Mr Kelleher said most sectors outside the housing market had been sluggish so far this year. Growth in consumer demand stayed at 1-2 per cent. He predicted overall domestic demand would be only modestly ahead of 2002. External demand was also weak, although he warned that the recent VAT fraud had made these figures hard to interpret.
He also said the pace of industrial growth had slowed considerably this year, partly due to a marked deceleration in the multinational sector, and a levelling of output in the pharmaceutical business. Mr Kelleher said output in this sector was unchanged during the first half of the year, while it saw growth of 30 per cent last year. "However, most forward-looking indicators have been more upbeat in recent months."
The services sector and industrial purchasing managers' indices were back over the benchmark of 50, which indicates growth in both sectors, said Mr Kelleher. At the same time, the tone of recent Economic and Social Research Institute consumer and business surveys were positive, he said. "A similar picture emerges from the EU consumer and business surveys, where the overall economic sentiment index has shown signs of recovery in the last few months," he added.
Mr Kelleher said recent good news from the US had boosted Irish sentiment. He attributed growth in America to stimuli such as the historically low interest rates and predicted rapid expansion there for the rest of the year.
"All in all, prospects for growth in \ economy have improved somewhat in the last three months," he said. But he stressed that conditions were not yet in place for growth of 5-6 per cent.
Mr Kelleher stated that while tax revenues would come in below the Minister for Finance, Mr McCreevy's budget predictions, the shortfall would not be as great as previously thought. "Next December's budget might not be the draconian affair earlier feared," he said. Global accountancy firm PricewaterhouseCoopers said yesterday that gross domestic product, which excludes multinational profits booked here before being repatriated,would grow by 2.75 per cent this year, and reach 4 per cent in 2004.
This compared favourably with a projected European average for both years of 1.75 per cent.
