BoI cuts growth forecasts to 3%

Bank of Ireland has cut its forecast for economic expansion this year, saying a decline in house building will see the pace of growth contract by a third.

As a result the bank now believes that Gross Domestic Product will grow by 3 per cent this year and 4 per cent next year, Bank of Ireland’s chief economist Dan McLaughlin said in a report today.
The Irish economy grew by 5.3 per cent in 2007.

Mr McLaughlin, who had previously forecast growth of 4 per cent, said the drop in residential building would shave 1.3 percentage points off the growth rate this year.

The Irish economy is enduring a turbulent time as the housing boom ends with unemployment on the rise and exports coming under pressure due to weak dollar and sterling exchange rates.

Last year "growth dipped below potential in the second half of the year however and this pattern looks set to continue through 2008 and into 2009," Mr McLaughlin said.

"The prime factor behind this cyclical slowdown is falling residential construction," he added. Housing completions are expected to fall to 50,000 this year, down from 78,000 in 2007.

Mr McLaughlin’s growth-rate outlook is considerably higher than the 1.8 per cent prediction issued by the Economic and Social Research Institute a couple of weeks ago.