Irish Finance Minister Michael Noonan’s forecast for faster economic growth this year may prove too optimistic, according to a Bloomberg News survey.
Gross domestic product will rise by 1 percent in 2012, according to the median estimate of 11 economists surveyed by Bloomberg. Last month, Noonan forecast expansion of 1.3 percent, quickening from an estimated 1 percent last year.
Cooling global growth is already hampering Ireland’s hopes of an export-led recovery. The nation’s economy shrank at the fastest pace in more than two years in the third quarter, as the euro-region crisis spread beyond Ireland, Greece and Portugal.
“The most worrying impact of the debt crisis on the Irish economy will be through reduced export demand,” said Conall Mac Coille, an economist at Dublin-based securities firm Davy. “It’s likely to have a significant impact.”
The euro-region’s economy will shrink 1 percent this year, as Europe’s leaders struggle to end the region’s debt deadlock, according to economists at HSBC Holdings Plc led by Janet Henry. Exports of everything from Kerry Group Plc dairy products to Kingspan Group Plc (KSP) insulation amounted to about 101 percent of Ireland’s gross domestic product in 2010.
“It looks like the euro zone is heading for a recession,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. “Given what is going on in the world as a whole, the risks are to the downside.”
Prime Minister Enda Kenny’s government is relying on exports to revive the economy, which shrunk about 15 percent between 2008 and 2010.
In November 2010, Ireland sought an international bailout after the country’s financial system (ISEF) came close to collapse in the wake of a real-estate bubble imploding. Home prices, which have dropped 46 percent since their 2007 peak, will fall 9 percent this year, according to the median estimate of seven economists.
Irish unemployment will probably average 14.2 percent this year, little changed from last year, according to the median forecast of economists, as Noonan presses ahead with a fourth year of austerity.
Noonan aims to reduce the country’s budget deficit to 8.6 percent of GDP this year from an estimated 10 percent in 2011. Exchequer returns for last year are due for release at 4:30 p.m. in Dublin today.
“What Ireland is doing is necessary but not sufficient for its recovery,” said Austin Hughes, chief economist at KBC Bank Ireland. (KBC) “It can’t be sufficient because that is going to be determined by events outside our control.”
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