Ireland Central Bank Raises 2015 Growth Forecast

(RTTNews) - Ireland's central bank on Wednesday raised the growth forecast for this year as it expects domestic demand to make a stronger contribution than previously envisaged.

In the latest quarterly bulletin, the Central Bank of Ireland raised the growth forecast for this year to 3.8 percent from 3.7 percent seen earlier. However, it reduced the outlook for next year to 3.7 percent from 3.8 percent.

"Risks to the forecasts are deemed to be tilted slightly to the upside," the bank said.

"Domestic demand could recover more strongly than envisaged in this Bulletin, particularly given the current momentum suggested by consumer and investment spending data and indicators."

In 2014, Ireland's economy grew for a second consecutive year, expanding 4.8 percent, which was the fastest pace since 2007. The country also logged the strongest growth in the EU, led by robust investments, exports and domestic demand.

The bank expects exports to return to growing broadly in line with projected growth in external demand.

"Given Ireland's trade links with the more strongly growing US and UK markets and the potential impact of ECB quantitative easing on euro area growth and the euro exchange rate, exports are projected to grow at a relatively strong rate over the forecast horizon," the bank said in the bulletin.

"On the domestic side, the momentum of recovery is building and it is envisaged that growth will increasingly be driven by domestic sources in coming years."

Exports were projected to rise 5.7 percent this year and 5.8 percent during next year. Further employment gains and rising disposable incomes are expected to underpin a pick-up in the growth of consumer spending, which was forecast to increase 2.2 percent this year and 2.1 percent in 2016.

Investment spending was also forecast to improve strongly in future, partly on the back of a recovery in the construction sector.

The bank expects the labor market recovery to continue and lead to a fall in the jobless rate to below 10 percent this year and to less than 9 percent in 2016.

Regarding inflation, the bank projected the harmonized index of consumer prices, that is meant for EU comparison, to rise 0.7 percent this year and 1.7 percent in 2016.