Improving demand for exports, coupled with a better than expected performance in the domestic economy, has led Davy Stockbrokers to increase its growth forecasts for the economy.
Davy has revised upwards its GDP growth forecasts, saying it expects the Irish economy to grow by 3.5 per cent this year and by 3 per cent in 2015. This new forecast is up from Davy’s previous expectation of GDP growth of 2.5 per cent for 2014.
In its latest economic forecast, the firm said the clear recovery in the domestic economy should become apparent in GDP growth this year, artificially depressed by poor export performance among multinationals last year. It said the recovery will also be more broad-based as consumer spending and investment growth accelerate.
"The exceptional strength of short-term indicators in H1 2014 such as the PMIs, tax revenue growth, retail sales and the falling unemployment rate has taken us by surprise," Davy chief economist Conall Mac Coille said.
He said these indicators suggest Ireland is “probably the fastest growing economy in the Eurozone”.
The stockbroking firm said it expects the government will need to implement a small €500 million adjustment in Budget 2015 to ensure the deficit falls to 2.9 per cent of nominal GDP.
“We expect consumer spending will accelerate to 1.5 per cent growth in 2014 and 1.9 per cent in 2015. The investment recovery should materialise in 2014 as temporary distortions from the aircraft leasing sector unwind and as construction output recovers.,” Mr Mac Coille said.
