Oct. 14 (Bloomberg) -- The Organization for Economic Cooperation and Development lowered its 2012 economic outlook for Ireland as export growth slows and said this may threaten the country’s deficit-reduction plans.
Gross domestic product will rise 1 percent next year, the Paris-based OECD said in a report today, after forecasting expansion of 2.3 percent in May. The group raised its forecast for this year to 1.2 percent growth from stagnation.
Slower-than-projected global growth may make it more difficult for Ireland to achieve a “sound fiscal position,” the OECD said, adding that this is “achievable.” Prime Minister Enda Kenny’s government has pledged to narrow the deficit to about 3 percent of gross domestic product by 2015 from about 10 percent this year.
“Providing that growth allows, the authorities should reduce the deficit faster than required,” the OECD said in today’s report. “Participants in financial markets are not yet fully convinced that Ireland will be able to return to a path of fiscal sustainability, as reflected by high sovereign risk spreads.”
The cost of insuring against Ireland defaulting for five years has dropped to 743 basis points from 1,296 since July 18, according to CMA prices. Swaps still implying a 47 percent probability of Ireland failing to meet its obligations.
Net export growth may slow to 2.5 percent next year from 3.7 percent this year, the OECD. The country’s unemployment rate will probably remain at 14.2 percent next year, the same as this year, before falling to 13.9 percent in 2013, as growth accelerates, the OECD said. Gross domestic product will expand 2.4 percent in 2013, according to the report.
--Editors: Dara Doyle, Fergal O’Brien
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