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Irish growth outlook improves on stronger exports
by Conor Humphries
Reuters Translate This Article
8 August 2012
DUBLIN (Reuters) - Ireland's economy will grow slightly faster than previously thought this year thanks to stronger exports, keeping Dublin on track to meet deficit targets agreed under its EU/IMF bailout, a Reuters poll shows.
The poll, released on Wednesday, forecast the economy expanded 0.5 percent in the second quarter on a quarterly basis, bouncing back from a 1.1 percent contraction in the first quarter although it remains fragile.
Economists forecast 0.7 percent growth for this year, matching the government's estimate and up from a projected 0.6 percent in a poll last month.
The 10 economists polled cited a better outlook for exports as the main reason for lifting their growth forecast, helped by a weaker euro, but said personal consumption and retail sales would fall this year.
They see exports rising 3.5 percent this year, up from a forecast of 3 percent in the July poll.
'Ireland is set to benefit more than any other euro zone country from the weaker euro,' Fergal O'Brien, chief economist at the Irish Business and Employers Confederation, said.
'This is going to help reflate the economy and boost nominal GDP, which in turn will improve debt sustainability and make it easier to reach the fiscal deficit targets.'
More than 60 percent of Ireland's exports are to markets outside the euro zone, making it far more susceptible to currency fluctuations than most other euro zone members.
Ireland desperately needs export-led growth to make inroads into a debt pile set to peak at 120 percent of GDP next year.
Dublin is still on track to get its deficit down to 8.6 percent of GDP this year, from 9.4 percent last year, as agreed under its EU/IMF bailout, the poll showed.
The government got a boost last month when it became the first euro zone bailout recipient to issue longer-term bonds, with a five-year issue totalling 4.2 billion euros. It had been forced out of bond markets in September 2010.
Four of six economists who answered said Ireland was likely to be able to make a full return to the bond market, with an issue of 10 years or more, by the end of next year.
The economy will grow by 1.8 percent in 2013, according to the poll, compared to a government forecast of 2.2 percent. GDP grew 1.4 percent last year, the first expansion in four years.
Very weak domestic demand will continue to weigh on the economy with personal consumption set to fall 2 percent this year and retail sales dropping 2.4 percent, the poll forecast.
Ireland's manufacturing sector grew at its fastest pace in 15 months in July but weak domestic demand meant its service sector contracted for a third straight month, purchasing managers' surveys showed.
'Economic recovery is tentative and the risks remain firmly weighted to the downside, not least due to the lingering euro zone sovereign debt crisis,' said Melanie Bowler, economist at Moody's Analytics.
(Editing by Susan Fenton)
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