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Central Bank hauls back economic growth forecasts

Three months ago the Central Bank thought the economy would grow by 2.4 per cent in 2011 – now it’s just 1 per cent.

Image: Julien Behal/PA Archive

THE CENTRAL BANK has revised its forecast for Irish economic growth for 2011 – dealing another major blow to the Four Year Plan and Fianna Fáil’s economic prospects.

This morning the bank confirmed that it was revisiting its previous estimate for the growth in Gross Domestic Product (GDP) – the total value of Ireland’s economic output – issued just three months ago.

In October, it thought GDP would rise by 2.4 per cent in the twelve months to come; instead, the bank now expects the growth in GDP to be as low as 1 per cent.

The quarterly report, which is the first to be issued since the conclusion of the EU-IMF deal, said that consumer spending would be hit by the effects of last month’s Budget, which increased taxes and reduced the amount people had available to spend.

The lowered estimate comes within a fortnight of the Economic and Social Research Institute (ESRI) also marking down its expectations of economic growth; three months ago it had forecasted growth of 2.25 per cent, but revised that down to 1.5 per cent on January 20.

The Four Year Plan, announced in October, was reliant on an economic growth rate of 1.75 per cent provided by the Department of Finance – though its provisions, if they remain adopted by the incoming government, can be stretched out over five years after the EU extended Ireland’s deadline for compliance with its rules on budget deficits.

The plan also forecasted growth of 3.25 per cent in 2012 – a rate now written off by the Central Bank, which forecasts 2.3 per cent for the same period.

The Four Year Plan’s growth in Gross National Product (GNP), measuring the total value of goods created within the state, expected growth of 1 per cent in 2011 – but the Central Bank now sees that contracting, with negative growth of 0.3 per cent.

Other estimates for Ireland’s economic growth include a projection for 0.9 per cent growth by the European Commission, and a contraction of 2.3 per cent by Ernst & Young.

About the author:

Gavan Reilly

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