Economic Eye: Winter Forecast - November 2011 - April 2012

Overview

GDP data published since the Ernst & Young Economic Eye - Summer 2011 report has surprised the majority of economic commentators on the upside for the Republic of Ireland (ROI) economy.

Quarterly GDP growth in 2011 Q1 and Q2 was 1.9pc and 1.6pc, the first consecutive quarters of positive GDP growth since 2006. Even with the economy forecast to return to recession in the second half of 2011, the strong H1 performance has been sufficient to lead to an upward revision in the GDP growth forecast for 2011 as a whole. The ROI economy is now forecast to grow in 2011 on an annual basis. This has provided a much-needed welcome cheer in an otherwise still very troubling economic environment. As a result of the upward revision in growth for the ROI economy - which accounts for four-fifths of the total All-Island economy - economic growth for the Island is also forecast to surpass expectations in 2011.

However, uncertainties in the Eurozone, limited signs of significant job creation, and a construction sector still firmly in recession, means that the economic mood in ROI is still far from upbeat. The twin speed economy continues to be evident with the domestic economy remaining in the doldrums and facing a further challenging year. While exporters enjoy better fortunes, a downgrade to growth
prospects in the Eurozone, UK and US has led to a downgrade in the Ernst & Young Economic Eye - Winter 2011 ROI export growth forecast for 2012, from 5.1pc to 3.0pc.

The latest Ernst & Young Economic Eye forecast is for GDP growth in ROI of only 0.5pc in 2012, followed by 3.1pc in 2013, before picking up to an average GDP growth rate of 4.1pc over the rest of the decade to 2020.