Post by earl on Apr 9, 2008 16:34:12 GMT
Irish economy 'remains one of world's most competitive'
A number of planned financial services investments have been postponed, but Ireland remains one of the most competitive rich economies for inward investment, National Irish Bank chief economist Ronnie O'Toole has said.
In his summer economic analysis, Dr O'Toole cuts his forecast for growth this year from 3.9pc in his last quarterly analysis, to 2.9pc. But this is still one of the higher estimates, with a Reuters poll of Irish economists finding a range of forecasts from 3.4pc to 1.6pc.
"This represents an economic re-adjustment, not a reversal," Dr O'Toole said. The main difference in the forecasts is in how many houses will be built this year.
Dr O'Toole thinks it will be 50,000 units, while most forecasters are now going for around 40,000.
That difference of 10,000 houses subtracts more than one percentage point from economic growth.
"Around 2,000 housing units have been completed this year already, so that points to a total closer to 50,000 than 40,000," he said. "We tend to forget about the 'self-build' housing, but that accounts for a quarter of the total and it seems to be holding up."
Yesterday, Davy Research said the latest data was consistent with 45,000 units being built this year. But with housing starts below an annual 25,000, the total units built next year may be only 40,000, producing a further drag on growth.
Dr O'Toole, who worked with the development policy body Forfas, says that foreign investment created the Celtic Tiger and that it is still a major driver of economic growth.
"One reason we don't hear about it is that we haven't had any 'Wow!' projects in terms of jobs lately. But the total adds up, and many in the services sector will have high value output, even when employing just a few hundred people."
Dr O'Toole sees a problem with unemployment in certain sectors and regions -- especially among men outside the big urban areas. "This is the biggest structural problem. The areas where men predominate are in decline. They are in the wrong regions, with the wrong skills and it is going to be hard for them to find new work."
For similar reasons, he thinks the property market will soon turn in Dublin, but has further to fall in other regions.
"It looks like house prices are bottoming out some 15pc below their 2006 peaks," he said.
Overall, Dr O'Toole expects exports to grow by 6.4pc this year, and personal spending by 3.7pc, which is also on the high side of forecasts. "There is a lot of comment on household debt, but little on household wealth, which will top €1 trillion (€1,000bn) this year.
"Irish consumption patterns have been relatively conservative since 2000, being based on income and employment rather than borrowing. Spending will be helped by lower inflation this year and competition in retailing," he said.
A number of planned financial services investments have been postponed, but Ireland remains one of the most competitive rich economies for inward investment, National Irish Bank chief economist Ronnie O'Toole has said.
In his summer economic analysis, Dr O'Toole cuts his forecast for growth this year from 3.9pc in his last quarterly analysis, to 2.9pc. But this is still one of the higher estimates, with a Reuters poll of Irish economists finding a range of forecasts from 3.4pc to 1.6pc.
"This represents an economic re-adjustment, not a reversal," Dr O'Toole said. The main difference in the forecasts is in how many houses will be built this year.
Dr O'Toole thinks it will be 50,000 units, while most forecasters are now going for around 40,000.
That difference of 10,000 houses subtracts more than one percentage point from economic growth.
"Around 2,000 housing units have been completed this year already, so that points to a total closer to 50,000 than 40,000," he said. "We tend to forget about the 'self-build' housing, but that accounts for a quarter of the total and it seems to be holding up."
Yesterday, Davy Research said the latest data was consistent with 45,000 units being built this year. But with housing starts below an annual 25,000, the total units built next year may be only 40,000, producing a further drag on growth.
Dr O'Toole, who worked with the development policy body Forfas, says that foreign investment created the Celtic Tiger and that it is still a major driver of economic growth.
"One reason we don't hear about it is that we haven't had any 'Wow!' projects in terms of jobs lately. But the total adds up, and many in the services sector will have high value output, even when employing just a few hundred people."
Dr O'Toole sees a problem with unemployment in certain sectors and regions -- especially among men outside the big urban areas. "This is the biggest structural problem. The areas where men predominate are in decline. They are in the wrong regions, with the wrong skills and it is going to be hard for them to find new work."
For similar reasons, he thinks the property market will soon turn in Dublin, but has further to fall in other regions.
"It looks like house prices are bottoming out some 15pc below their 2006 peaks," he said.
Overall, Dr O'Toole expects exports to grow by 6.4pc this year, and personal spending by 3.7pc, which is also on the high side of forecasts. "There is a lot of comment on household debt, but little on household wealth, which will top €1 trillion (€1,000bn) this year.
"Irish consumption patterns have been relatively conservative since 2000, being based on income and employment rather than borrowing. Spending will be helped by lower inflation this year and competition in retailing," he said.