THE EUROPEAN COMMISSION has affirmed its expectation that the Irish economy will grow at a slightly slower pace than the forecasts issued by the Government.
A report published this morning shows that Brussels expects the Irish economy to grow by 1.1 per cent this year.
That compares to an expectation of 1.3 per cent in the Irish Government’s Stability Programme Update issued only last week, and a projection of 1.5 per cent issued at the time that Budget 2013 was published.
The lower-than-expected growth in GDP – the value of all goods and services produced in Ireland – means the government will find it more difficult to meet the deficit-to-GDP targets laid down in the bailout plans.
The Commission said it expected Ireland’s budget deficit for 2013 to be the equivalent of around 7.5 per cent of its GDP – virtually unchanged from the 7.6 per cent of last year.
The biggest dent in the deficit will be made in 2014, when GDP is expected to rise by 2.2 per cent, meaning the deficit will fall to 4.3 per cent of GDP.
Ireland will need to reduce the deficit to within 3 per cent of GDP by 2015 in order to meet the targets set by the European Commission.
Ireland’s own forecasts, however, had suggested economic growth of 2.4 per cent for next year – suggesting that Ireland may not have as much breathing space as expected in its efforts to meet those targets.
The forecasts also paint a gloomy picture for Ireland’s efforts to lower its unemployment rate – Brussels’ forecast is that unemployment will average at 14.2 per cent this year. The rate currently stands at 14.0 per cent – indicating an expectation that the numbers out of work will increase gradually this year.
Next year’s forecast is that unemployment will fall to 13.7 per cent – a number which would still mean hundreds of thousands of people out of work.