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Scaling back on fiscal adjustment is risky, says Central Bank

The Central Bank has downgraded Ireland’s growth forecast for this year stating Ireland’s recovery will be a “gradual” one.

Central Bank of Ireland
Central Bank of Ireland

IN ITS QUARTERLY bulletin, the Central Bank recommended there should be no easing off in fiscal adjustment.

Any scaling back of the planned fiscal adjustment “runs the risk of starting to unwind the positive effects” of the considerable consolidation effort to date, which has amounted to around €28 billion, the report stated.

Growth

The Bank said it was revising its GDP growth expectations and downgraded Ireland’s growth forecast for this year.

The report states that growth in the first half of the year was “weaker than expected” but said that the forecast is for a continuation of the “gradual recovery” though at a slightly “slower pace than previously expected”.

The Central Bank said the second quarter of this year saw some rebound in economic growth, helped by a recovery in consumer spending and exports.

GDP

The Bank’s latest forecasts for GDP growth for 2013 and 2014 are marginally lower than those published in the last Bulletin, they said.

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GDP growth of 0.5 per cent is now projected for this year, with growth of 2.0 per cent forecast for 2014, representing a downward revision of 0.2 and 0.1 per cent, respectively to the previous forecasts for 2013 and 2014.

The report added:

Ireland is at the point at which it is about to exit the EU/IMF Programme, but is doing so at a time when deficit and debt levels are very high and there are risks in the future.

It started that market participants will be looking closely at how Ireland performs outside the Programme and whether the sustainability of the overall debt is secure.

Central Bank cuts growth forecast and tells govt: Don’t ease-up on austerity>

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