The Irish economy can grow by between 3 and 4 per cent next year driven by a strong US recovery in the second half of 2001 according to a leading Irish economist.
Mr John Beggs, chief economist at AIB Group Treasury, said today that the swift response of central banks to the September terrorist attacks has set the stage for a marked global upswing next year.
Writing in AIB Group Treasury’s quarterly economic report published today Mr Begg maintained that the so-called "v-shaped" recovery is still possible given the current low level of interest rates and the massive fiscal stimulus being pumped into the US economy.
"Although the downturn in activity will now prove steeper than expected during the second half of this year, the rebound is forecast to be stronger than envisaged before the September 11th attacks. Thus a v-shaped recovery is in prospect for the world economy in 2001/2002," Mr Beggs said.
Mr Beggs noted that Irish economic growth has stagnated since the first quarter but should still record an average growth rate of 6.8 per cent in 2001.
"Despite the fact that we expect a reasonably strong pick-up in activity in the latter half of nexct year as the global economy recovers, growth in real GDP terms next year may be no more than 3 to 4 per cent." the report says.
In the longer term the Irish economy is expected to bounce back to its growth trend of 5 per cent in 2003 and 2004.
Mr Beggs said the continuing weakness of the euro against the dollar despite a considerable differential in US and euro zone interest rates shows that investors still see structural weaknesses in the euro zone.
The forecasts in the report are based on the assumption that no more terrorist attacks such as September 11th occur in the near term. Any further attacks could seriously damage already faltering consumer confidence.