Bloxham revises economic forecast

Bloxham has revised downwards its Irish economic forecast for the year, blaming uncertainty in the global economy for a weakening of the country’s prospects.

It now projects growth of just 0.5 per cent in real gross domestic product, compared with previous estimates of 1.1 per cent. Next year, GDP is expected to grow by 2 per cent, according to Bloxham's estimates.

Gross national product, meanwhile, will remain static this year, before increasing by 1.4 per cent in 2013.

Slowing exports are expected to weigh on Ireland's growth for the year, although overseas trade is expected to remain the main driver behind the economy.

"The improving economic picture in the United States is a promising development for Ireland but the overall uncertainty over the world economy and Euroland in particular, is likely to weigh negatively on the country's growth prospects this year," chief economist Alan McQuaid said. "Ireland's economic recovery will slow in 2012 as a result of weakening export demand."

However, the country is in a much better position than other euro zone peripheral debt countries to grow once the world economy picks up, Bloxham said.

On the domestic front, however, the report said there was little to be optimistic about, predicting a 1.5 per cent decrease in spending for the year as consumers remain cautious and savings rates remain higher than normal. It is expected to fall further in 2013, declining by half a per cent, before making a modest contribution to the economy in 2014.

The report also pointed to the unemployment rate and weak labour market as a cause for concern, noting that there was little sign of any underlying improvement. It predicted an average unemployment rate of 14 per cent for the year, falling to 13.5 per cent in 2013.

"The Government is well aware that there is no easy fix to the unemployment problem, and things are unlikely to improve on the jobs front until the economy starts to grow again on a sustained basis," the report said. "In our opinion it is going to be a very slow process as regards tackling the huge unemployment problem, and it will be a number of years before the jobless rate falls back into single digits."

Bloxham also warned against implementing further austerity measures if the current fiscal targets are not achieved.

"Further austerity than is absolutely necessary would send the economy backwards instead of forwards as required," the report said.