EMPLOYERS’ GROUP Ibec has revised upwards its economic forecasts for 2010 and 2011.
In its latest Quarterly Economic Trendspublication, the body says net exports will make a positive contribution to growth in 2010 and that GDP will be -0.1 per cent as against its earlier forecast that it would be -0.7 per cent.
Chief economist David Croughan said improving international demand and the significant weakening of the euro in recent months had provided a much more positive environment for the export sector.
The body has also revised upwards its GDP figure for next year, to 2.3 per cent from 2.1 per cent. Mr Croughan said the outlook for consumer demand has improved since the start of the year and is now helping to lift the economy out of recession.
“We have revised upwards our outlook for consumer spending since our last forecasts in March. We had expected that the absence of tax increases in Budget 2010 would ultimately boost consumer confidence, but the recovery has been somewhat stronger than we expected.”
He said investment continues to have a significant drag on Irish economic growth and industry is concerned that activity in 2011 will fall further than expected.
A combination of credit access difficulties, the need for business to further deleverage, and renewed volatility in international credit markets was weighing on firms’ investment plans, he said.
“The outlook for 2011 continues to be shrouded by uncertainty as the sovereign debt crisis continues to hang over the euro area.”
He said Ibec and most business organisations in Europe welcomed the proposed increase in surveillance of economic policy in euro member states. Had such a system been in place at the outset of the single currency, Ireland might have avoided the economic imbalances that made the global economic crisis so much worse for it.
Caution rather than exuberance would have ruled the day and business would have had a more stable operating climate, he said.
“Some will argue that it saps national sovereignty. So it does a little, but that is the price and indeed the comfort of sound governance in a single currency,” the Ibec document said.
It said everyone must accept that through policy choices including tax, regulatory enforcement and “even the partnership process”, good economic governance suffered since Ireland joined the single currency. In the years leading up to the euro, Ireland pursued appropriate policies to ensure the economy was judged fit to be a member.
“The crisis affords us the opportunity to make some fundamental improvements to economic governance at European and at member state level,” Mr Croughan said.
