Economic growth in Ireland this year will be 2.9 per cent, according to the latest National Irish Bank (NIB) forecast.
This is significantly lower than the prediction made by NIB chief economist Dr Ronnie O'Toole, the author of the report, in January when he issued an upbeat outlook for 2008 and said he expected growth of 3.9 per cent.
However, today's prediction is more optimistic than the latest estimates from the Central Bank, which last week cut its forecasts to 1.9 per cent from 2.6 per cent just three months ago.
Dr O’Toole said there was evidence that the housing slowdown and the worsening global economic slowdown were being felt in the wider economy. But he said the decline in Ireland's competitiveness was being exaggerated and that foreign investors continue to create new jobs, "the quality of which is far superior to what we attracted in the past”.
Dr O’Toole added that house prices appear to have bottomed out following falls of 16 per cent since their peak in 2006. He said “more normal levels of activity" will return in the second half of the year.
He expects employment growth in the year to slow to 20,000 new jobs, down from the 68,000 created in 2007.
The growth of the Live Register, which has increased to almost 200,000 in the first quarter, was evidence of the housing slowdown and an indication that economic growth outside the construction sector is moderating, the forecast found.
Dr O’Toole expects private consumer demand and exports to perform strongly this year, and he noted that foreign investment remains strong - particularly in services.
“Consumer spending and export demand will prove robust enough to bring us through the worst in 2008, and stronger growth will return in 2009,” he said. “In combination with higher energy and food prices, and slowing housing markets, domestic demand is under considerable pressure. In the US, a recession may be imminent or is already unfolding.”
Dr O’Toole predicted the high euro zone inflation rate of 3.5 per cent would see the ECB delay the first of its quarter point rate cuts until September. This would be followed by two further cuts in December and a third in March next year, he added.
