Goodbody upgrades its growth forecast to 5.5%

Stockbroking

firm Goodbody expects the Republic’s economy to grow by 5.5 per cent this year, ahead of the 4.3 per cent it previously forecast.

Goodbody chief economist Dermot O’Leary says in a report published today that growth in the Republic’s gross domestic product (GDP) – a measure of all the wealth generated in the State – is accelerating past a peak reached last year.

“We are upgrading our growth forecasts materially, and now expect GDP growth of 5.5 per cent in 2015, with 4 per cent expected for both 2016 and 2017,” he says in the firm’s latest quarterly report on the economy. Strong exports, continued inward investment, employment growth and increasing consumer spending are combining to mirror rates of expansion last seen in the late 1990s, the report says.

Acronym

The firm has coined an acronym, nice (non-inflationary credit-less expansion), partly inspired by former Bank of England governor Mervyn King, to describe the economy’s current phase. Mr O’Leary argues that conditions reflect the late 1990s, when joblessness tumbled and productivity and competitiveness grew, rather than the following decade,when expansion was largely fuelled by a credit boom.

He estimates that exports will account for 1.6 percentage points of the total growth this year, and notes that the increase will be across both goods and services.

He does not believe that the slowdown in China will hit growth here. “It’s nothing new, it’s been happening for some time,” he said yesterday.

However, he warned the likelihood of an interest rate rise in the US in September could have implications for the Republic. Similarly, any dampening of consumer demand resulting from a Bank of England rate increase early next year could also be a source of concern.