Ireland's economy is expected to stagnate this year, taking the shine off its expected completion of a bailout and limiting room to ease austerity, a Reuters survey of economists showed on Thursday. The euro zone country emerged from recession in the second quarter but although it is expected to accelerate in the latter part of 2013, 10 economists in the survey expected zero growth this year and expansion of 1.7 percent in 2014.
Only one month ago, comparable forecasts were for 0.5 percent growth this year and 2.0 percent in 2014, but that was before data showing June quarter growth of just 0.4 percent and a decline year-on-year of 1.2 percent. The latest forecast for 2013 pales in comparison with 2.2 percent growth in 2011, the year after Ireland began its three-year international aid programme, that sparked hope among euro zone partners that the open economy could weather the bloc's woes.
The government has said it will ease up on 3.1 billion euros ($4.2 billion) of planned savings when it unveils next year's budget later this month, but had hoped the slack afforded by a bank debt deal struck with the European Central Bank would allow it to bring in a far less stringent set of cuts. "It should stay as close as possible to the 3.1 billion target," Eoin Fahy, chief economist at Kleinwort Benson, said of the effect the slow economy will have on the October 15 budget.
"A small divergence is not too concerning provided it is clearly due to the gains from the promissory note deal and not an indication of reduced commitment to meet budgetary targets." There are some signs of recovery - the unemployment rate has fallen to a three-and-a-half year low, manufacturing is growing and consumer sentiment is at a six-year high - but many people are deep in debt and mortgage arrears are a growing problem. The economists see exports expanding by just 0.5 percent this year, a slightly better forecast than a month ago but sharply down from 2.9 percent in June. Exports are forecast to rise by 3.1 percent next year.
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