Bank warns of slow economic growth
The economy will not grow as quickly as previously forecast, the Central Bank has warned.
While exports will do well this year, consumers remain more concerned about the impact of tax hikes and cutting debts than spending.
Experts said they expect gradual growth in the economy during the year but the unemployment crisis will only begin to ease in the last few months of 2011.
The Central Bank's spring outlook said the value of all goods and services, measured by Gross Domestic Product, is projected to grow by about 1% this year and rise to 2.3% next year.
The forecast is down significantly from October when it suggested 2.4% growth for 2011, based on budget savings of 3 billion euro this year.
The Central Bank said it was forced to revise its figures after the Government decided on 6 billion euro of tax increases and spending savings in the budget.
"While this is the Bank's central scenario, a range of both stronger and weaker outcomes are, of course, quite plausible," the report said, adding that growth will be mainly linked to the export sector this year.
On the consumer front, the report said domestic demand remained subdued and although the lack of spending is beginning to moderate, the impact of the budget cuts will pile on further pressure.
"With employment projected to continue to fall slightly in 2011, with the effect of higher taxes on disposable incomes, and with households seeking to reduce their indebtedness, consumer spending is forecast to contract further this year," the report said.
On the jobs front it will be 2012 before there is any growth, with a slight rise in the unemployment rate this year to 13.7% before a fall to 13.4% the following year.