The economic outlook for Ireland may be gloomier than anticipated, a leading investment house warned today.
In its investment outlook for 2002, Hibernian Investment Managers (HIM), said; "that while we expect a global economic recovery in 2002, driven by the predicted recovery in the US, this may not be as soon, as strong or as sustained as generally anticipated."
It said: "For Ireland, the outlook is even more uncertain with any shortfall in the US recovery likely to result in serious consequences this side of the Atlantic."
HIM is predicting a 0.5 per cent GDP growth rate in the US this year which is lower than most forecasts, and US interest rates to rise by 0.75 per cent (to 2.5 per cent) in the second half of this year, well below the 2 per cent rise expected by the market.
The Irish economy, which experienced a more dramatic slowdown than the US in 2001, will further deteriorate in 2002, it says. HIM forecasts a decline in GDP growth from 6.5 per cent in 2001 to 4% this year.
HIM’s chief investment officer, Mr Martin Nolan said: "Our overall economic view is that global economies will recover in 2002, led by the US."
Equity markets have begun to anticipate this, and we envisage that the gains made since the September 21st low will continue into the first half, supported by ample liquidity, the lowest interest rates for thirty years, fiscal stimulus and lower oil prices.
"However, uncertainties remain regarding US corporate profitability, corporate cash flow and consumer demand. These uncertainties are likely to affect the ability of the equity markets to sustain a rally into the second half of the year," he warned.
With regard to the Irish property market, HIM predicts a further price decline of up 10 per cent at the upper-end of the market.
