Colm Kelpie, Published: 07/10/2014
BUSINESS lobby group Ibec has almost doubled its growth forecast for this year to 6.1pc on the back of positive data across the economy.
The group had originally forecast GDP growth of 3.1pc for 2014. It also hiked its projections for next year to 4.5pc from 3.9pc.
It predicted exports will grow at their fastest pace since the turn of the century and said business sentiment remains high, with companies displaying strong faith in the recovery.
Ibec economist Fergal O’Brien said the economy was recovering much faster than many had expected. “Importantly, growth is coming from a broad range of sources, with domestic demand and trade contributing strongly,” Mr O’Brien said.
“Ireland is set to be one of the world’s best-performing developed economies this year.”
Ibec reiterated its call for income tax cuts in next week’s budget, saying there was no need for any further austerity.
But it said that despite the strong growth figures, Ireland remains about 3.5pc below its peak in terms of volume levels. It said exports would grow by more than 12pc this year – the strongest growth since 2000.
There’ll be similar trends in imports, which will rise 11pc, with the resulting net exports contributing more than half of the predicted 6.1pc growth, the lobby group said.
With confidence among companies remaining strong, Ibec said it expects investment growth this year and next of 14.3pc and 13.8pc respectively.
Disposable income will increase by 3pc next year, with a 1.5pc hike this year.
Employment numbers will return to early 2009 levels by next year, it predicted.
“Ireland is firmly on the way back and this gives the Government options on Budget day. Recent tax hikes have pushed our marginal tax rate, at 52pc, way out of line with our international competitors,” Mr O’Brien said.
“While the Government needs to keep a steady hand on expenditure, it now has the capacity to cut employment taxes in order to put more people back to work.”
Finance Minister Michael Noonan, who will deliver Budget 2015 in the Dail next Tuesday, has said his department expects the economy to grow by 4.7pc in GDP terms this year. That was up from the 4.5pc he forecasted just days before that, and about 3pc just prior to that.
Official growth projections will be published on Budget day.
The Central Bank last week forecast growth this year of 4.5pc and called on the Government to do more than the minimum necessary to meet the crucial below 3pc of GDP deficit target. But it stopped short of stating what adjustment should be imposed in the Budget.
The revised forecasts come on the back of data from the Central Statistics Office which showed the economy grew by a massive 7.7pc between April and June of this year, compared with the same period last year.
The Economic and Social Research Institute (ESRI) will detail its latest take on the economy tomorrow when it publishes its quarterly commentary.