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Bank of Ireland predicts Irish GDP growth to accelerate to 5% in 2004

31-Jul-03

    The recent rally in equities and rise in longer-term interest rates is testimony to a growing belief in financial markets that the global recovery is gaining momentum. The US economy, in particular, is expected to grow at an annual pace in excess of 3% in the second half of 2003, and to record 3.5% growth in 2004.

    In Ireland, growth will accelerate, from an average of 2.5% in 2003 on the GDP measure to 5% next year, which will be sufficient to stabilise the unemployment rate at an average of 5% in 2004. Inflation will continue to decline near term, to around 2.5% by year-end, and may touch 2% in early 2004 before averaging 2.5% for the year as a whole. Government borrowing will emerge around the Eur1.9bn target, with a tax shortfall offset by savings on unemployment benefit, debt service, and EU payments.

    Bank of Ireland's Group Chief Economist, Dr Dan McLaughlin said: "Ireland has weathered the international downturn remarkably well, as evidenced by the modest rise in the unemployment rate, thanks to a combination of low interest rates and counter-cyclical fiscal policies, which sustained employment. The strength of bank lending, both mortgage and non-mortgage, is also not consistent with an economy as weak as often portrayed. This soft landing by the economy has been obscured by the confusion surrounding the divergence between GDP and GNP as measures of growth.

    Unfortunately this will continue to cloud the issue in 2004, although this time a fall in multinational profits will result in a strong rise in GNP relative to GDP - we expect a 3.5% rise in GNP in 2003".

    Profile of Bank of Ireland Treasury and International
    Bank of Ireland Treasury and International, Ireland's number one treasury services provider, offers a comprehensive range of treasury and international banking services to Irish and international companies from its global headquarters in Dublin. Customers are provided with a single point of contact to handle all their treasury and international banking needs from currency, interest rate and international trade risk management to treasury investment solutions and global payments. It has built up considerable expertise in risk management and has a reputation for innovation and price competitiveness in the marketplace. Bank of Ireland Treasury and International consolidated its position as the leading provider of treasury services in Ireland, by winning the Irish Association of Corporate Treasurers (IACT) Treasury Institution of the Year 2002 award - for the fourth successive year.

    31ST July 2003

    - ENDS -

    Dr Dan McLaughlin
    Group Chief Economist
    Bank of Ireland
    Tel: 01 609 3326

    Gillian Coghill
    Marketing Communications Manager
    Bank of Ireland Treasury and International
    Tel: 01 609 3302

    Anne Mathews
    Media Relations Manager
    Group Corporate Communications
    Tel: 01 604 3836

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