NCB stays bullish and predicts GDP growth of 7%

NCB Stockbrokers said it remained optimistic about the prospects for the Irish economy and expected GDP growth of around 7 per…

NCB Stockbrokers said it remained optimistic about the prospects for the Irish economy and expected GDP growth of around 7 per cent this year.

"We are at the extreme in terms of economic forecasts on the positive side and nothing has come through that has caused us to divert from that," NCB's chief operating officer Mr John Keilthy said. "We were bulls and still are bulls in relation to the economy."

Rival stockbrokers Davy is forecasting GDP growth of just 1.6 per cent in 2002 while the Central Bank expects growth of 2.75 per cent this year.

NCB said its latest purchasing managers' index (PMI) suggested that the slowdown in the economy was passing while the international backdrop was also showing signs of improvement. According to the PMI, the manufacturing sector expanded for the first time in seven months in February.

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The index, which has risen steadily from a low of 46.1 last October, recorded a reading of 50.4 last month, above the critical 50 level that divides expansion from contraction.

"The sharp pick-up in the exports index and the recovery in output orders indices in the last few months is consistent with the improving outlook for the global economy and suggests that the Irish manufacturing sector is still in robust shape," said NCB economist, Mr Eunan King.

The turnaround in the US economy, which was showing signs of recovery, should support exports this year while consumer spending remained robust, he said.

Mr King is forecasting growth of 6 per cent in consumer spending this year, up from 5 per cent last year while he believes investment should pick up to 3.7 per cent from 3.2 per cent in 2001.

He expects export growth of 9 per cent this year, from 8.5 per cent last year, as the global outlook improves. More fundamental factors should continue to lend support to the economy, NCB said. The demographic structure in the Republic, with a rising number of people over 25 years of age, should continue to boost demand, particularly for housing, Mr King said.

One reason behind NCB's bullishness is a belief that the exposure of the economy to the external environment is more limited than feared by many. Foreign-owned companies are the main exporters and their linkages with the rest of the economy are weak as they are not big employers nor do they source much domestically, according to Mr King.