BOI predicts GDP growth to average 6% in 2006

GDP growth will remain at 5 to 6 per cent for the next 18 months, averaging 6 per cent next year and 5

GDP growth will remain at 5 to 6 per cent for the next 18 months, averaging 6 per cent next year and 5.8 per cent in 2007, Bank of Ireland has predicted.

The bank also said the Minister for Finance's December budget will include a include €3.5bn injection into the economy.

In its quarterly economic outlook published today, Bank of Ireland said growth is being fuelled by consumer spending, which the commentary said is set to rise by over 10 per cent in cash terms this year.

This in turn has been underpinned by employment growth and a "modest decline" in savings following the recent maturation of some SSIA accounts.

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Dr Dan McLaughlin, chief economist of Bank of Ireland Group said: The pace of employment growth continues to surprise to the upside, and our 80,000 forecast for 2006, which was well above the consensus, now looks conservative in light of the trend year-to-date.

"Data for the second quarter showed an annual employment gain of 88,000, taking the total at work to over two million for the first time.

"This follows a 90,000 annual gain in Q1, so maintaining the extraordinarily strong pace of job creation evident since early 2005. Employment growth of 75,000 is expected in 2007."

BOI said the average Irish income (GNP) is rising faster than output thanks to inflows from Irish assets abroad.

It noted this was "a reversal in the historical norm", and resulted in a GNP growth of 8 per cent during the first half of the year. This is expected to lead to average growth of 6.6 per cent in 2006, BOI said.