A surge in exports this year could result in much stronger rates of economic growth than those forecast by the Department of Finance, with some economists suggesting the economy could expand by 5 per cent or more in 2002.
In its Economic Review and Outlook, the Department suggests that gross domestic product (GDP) will increase by 3.6 per cent, down from its earlier forecast of 3.9 per cent for this year.
Its forecasts, however, are based on the national accounts for the four quarters of 2001 and fail to take account of the strong performance of Irish exports in the first quarter of 2002, which is a key factor underpinning more optimistic forecasts.
Bank of Ireland chief economist Dr Dan McLaughlin is sticking to his forecast of 5 per cent growth.
He believes the Department is being too optimistic in terms of its forecasts for growth in consumption and in investment, and has underestimated the rate at which Irish exports will continue to grow.
The Department has fractionally raised its forecasts for export growth from 4.7 per cent to 4.9 per cent while imports are also expected to expand by 4.7 per cent ahead of earlier estimates of 4.3 per cent.
Official figures for the first quarter of 2002 have reported Irish exports growing at more than 8 per cent, well ahead of official forecasts, with the strong trend expected to continue in the months ahead.
"Exports have accelerated, not decelerated. For the whole year I expect exports will exceed imports and boost GDP growth to around 5 per cent," Dr McLaughlin said yesterday.
Mr Dermot O'Brien, economist at NCB Stockbrokers, suggests economic growth of 5.5 per cent is feasible this year, again pointing to stronger-than-forecast export growth. Inflation will also continue to rise, with the Department increasing its year-end forecasts from 4.2 per cent to 4.7 per cent.
This suggests that the rate of price increases will continue to accelerate twice as fast in the Republic as in other euro-zone areas in 2002.
The review points to a surplus of just 0.1 of a percentage point of GDP.
