Oct. 4 (Bloomberg) -- Ireland’s central bank lowered its economic growth forecast for next year, as export growth slows and consumer spending falls.
Gross domestic product will rise 1.8 percent next year, the Dublin-based central bank said in its quarterly bulletin on its website today. The bank in July forecast growth of 2.1 percent. The bank raised its forecast for this year to 1 percent, from its 0.8 percent estimate three months ago, after second-quarter growth beat analysts’ estimates.
“Consumption is likely to weaken in the second half of this year and fall back further during next year,” the central the bank said. A “more muted outlook” for exports in the second half of this year is expected to be “sustained through much of next year.”
Irish Finance Minister Michael Noonan said last month that slowing growth in Ireland’s trading partners may hamper the economy even as he tries to cut the fiscal deficit. The government has pledged to reduce the deficit about 3 percent of gross domestic product by 2015 from about 10 percent this year.
The central bank said today there are arguments to be made in favor of speeding up the process, though “it would not be advisable to frontload the adjustment in a dramatic manner.”
Personal expenditure is forecast to decline 2.6 percent this year and 0.8 percent next year, the central bank said. Exports will rise 5.3 percent and 5.2 percent, it said.
Ireland’s 10-year borrowing cost, which reached 14.22 percent in July, has dropped to 7.68 percent.
“Yields, though they have fallen, remain at levels that are inconsistent with a return to market funding,” the central bank said. “Further very significant progress has to be made in convincing market participants of the country’s creditworthiness. ”
--Editors: Dara Doyle, Fergal O’Brien
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