DUBLIN (Reuters) - Economists are increasingly confident that Ireland will avoid falling back into recession when quarterly growth figures are released later this month, but the economy faces growing pressure from weak domestic demand, a poll showed on Tuesday.
Irish Gross Domestic Product (GDP) contracted by 1.9 percent in the three months to September last year compared with the previous quarter, far worse than expected, raising fears that chronically weak consumer demand would plunge the economy back into recession.
But strong retail sales and exports in December will help secure growth of 0.4 percent, according to the median forecast of eight Irish-based economists polled by Reuters, up from a forecast of 0.1 percent last month.
The median forecast for fourth-quarter growth in Gross National Product (GNP), seen by some economists as a more accurate indicator of the state of the economy because it strips out the earnings of Irish-based multinationals, improved to 1.5 percent from 1.1 percent last month.
“A less bad picture in the euro zone, decent consumer figures and reasonable export numbers look like they have helped Ireland get over the line in the fourth quarter,” said Eoin Fahy, economist at Kleinwort Benson Investors.
“The key factor for Irish growth in 2012, both on the upside and the downside, is growth in the euro zone. The tone of forecasts is improving slightly for the euro zone and that can only be positive for Ireland.”
If the EU’s treaty to tighten budget rules is rejected at a referendum expected in coming months after a surprise government announcement last week, this would have potential to spook financial markets and could even impact the broader economy, Fahy added.
But the government is likely to secure a concession on the refinancing of its bank bailout, all six economists who replied to the question said, a move that government ministers have said could boost efforts to secure a “yes” vote.
Dublin has been pursuing a months-long campaign to amend the terms of its bank bailout by better financing some 30 billion euros ($40 billion) worth of promissory notes, a form of IOU, used to recapitalize failed lender, the former Anglo Irish Bank.
The median forecast for 2011 GDP growth ticked up to 0.9 percent from 0.8 percent last month, while the forecast for 2012 remained at 0.7 percent.
Export growth of 3 percent this year will be offset by a fall in personal consumption of -1.6 percent, worse than -1.4 percent in a poll a month ago. Retail sales will fall by 1.5 percent this year, the poll said.
“There is little to be optimistic about as regards the Irish consumer or personal spending in the immediate future,” said Alan McQuaid, chief economist at Bloxham Stockbrokers. “All told, another year of subdued personal spending is on the cards.”
Editing by Padraic Halpin; editing by Stephen Nisbet