Central Bank maintains forecast

The Central Bank expects the unemployment rate to go unchanged this year before dropping slightly in 2013.

In its second quarterly economic bulletin of the year, the Central Bank said unemployment was likely to be 14.4 per cent at the end of this year, down from a forecast of 14.6 per cent three months ago.

The reduction in the forecast was attributed to even larger numbers leaving the labour force, which suggests more people will return to education or emigrate.

The rate is forecast to fall to 14 per cent next year "on the foot of modest employment growth".

The bulletin marks the first occasion in some time that the Central Bank has not grown more pessimistic about the prospects for the economy. It has kept its gross domestic product growth forecast for 2012 at 0.5 per cent. Its forecast of growth of 2.1 per cent in 2013 is also unchanged.

While the bank's forecasts for a narrower measure of economic activity, gross national product, are lower – at -0.7 per cent in 2012 and 1 per cent in 2013 – they are also unchanged on three months ago.

In its assessment of the public finances, the bank said that it appears targets for the year are on course to be met at this juncture and that "no overall adjustment to the scale of the fiscal measures announced in the Budget seems to be required at this time."

Commenting on international economic conditions, the bank's economists describe as a "limited improvement" in the external environment in recent months as the crisis in the euro area has calmed.

The European Central Bank has played "some" role in calming the crisis it said, mostly be providing longer term liquidity to the banking system. in December and February the ECB offered unlimited three year loans to banks. More the €1 trillion was borrowed.

The bank also repeated calls for the liberalisation of closed services sectors and continued momentum in the reform of the public sector.