Belfast Telegraph

Republic's growth will accelerate next year, says chief economist


The Republic's business lobby group Ibec has hiked its growth projections for next year to 2.8% – a more bullish assessment than its government's forecast.

Ibec said that with the bailout exit at the weekend, Northern Ireland's biggest export partner was entering a new phase of strong growth, claiming the recovery would gain momentum in 2014.

Its revised projection for GDP next year is in contrast to the more conservative estimate of 2% from the Irish Department of Finance.

Northern Ireland's economy, in contrast, is expected to expand by just 1.6% in 2014, according to business advisers PwC.

Economist Fergal O'Brien described the exit from the bailout as very significant and said it would bolster consumer and business confidence.

"The prospects for 2014 are good, and businesses believe the recovery will gain further momentum next year.

"Growth should accelerate to nearly 3% and this will lead to about 50,000 new jobs," he said.

London-based Seven Investment Management economist, Justin Urquart-Stewart, said the importance of the bailout exit to the international investment community couldn't be underestimated.

Key Ibec forecasts for 2014 include:

* Growth will hit 2.8%, up from previous forecasts of 2.3%.

* Investment in the economy will increase by 15.5%, compared with the previous projection of 9.7%.

* Consumer spending will increase by 1.3%. The previous estimate was 1%.

"The GDP growth estimate for 2013 of under 1% is not a true reflection of real economic activity – the 2.5% employment growth this year is a much more accurate indicator," said Mr O'Brien.

Ibec has also indicated that consumer sentiment has increased significantly over the past year and that this augurs well for a recovery in consumer spending in 2014.

But it pointed out that retail sales have disappointed in recent months, despite that better sentiment.

"We suspect that factors such as strong growth in online purchasing could be at play," it said.

Ibec reiterated its call for an income tax cut, calling current rates a disincentive to work and job creation.

It was reported last week that hard-pressed middle-income PAYE workers will be in line for a tax cut before the next general election.

Ibec said further reform was needed to public sector pensions, with the move to career-average earnings instead of final salary basis extended to all.

It also said 4% of GDP should go to capital expenditure by 2020 to meet the country's economic and demographic needs.

"Irish firms are winning new business, driving growth and putting people back to work. A recovery in consumer demand next year will see improved conditions for those trading domestically," added Mr O'Brien.

Belfast Telegraph