Economy has turned a corner?

Employers’ group, IBEC, today said that clear signs are emerging that the second half of this year will see the economy turn a corner, forecasting 1.1pc GDP growth for 2013.

Its latest Quarterly Economic Outlook said that despite a weak start to the year there were clear signs that the economy had picked up in recent months.

The group said it was cautiously optimistic that a better performance in the second half of the year would off-set the poor economic figures of the first quarter. IBEC nevertheless warned that consumers remained nervous and said it was vital that the budget did not undermine confidence by increasing taxes.

It said that the second half of the year provided a crucial opportunity to restore normality to the property market, which would in turn have significant wider benefits for the economy. The recent annual rise in national property prices suggests the market has finally stabilised; new targets to address the high level of distressed loans will determine if we can restore sustainable growth and a functioning, efficient mortgage market.

It forecast growth at 1.1pc this year and rise to 2.3pc growth in 2014 but said that consumer spending will remain flat this year and increase by 1pc in 2014.

Investment in the economy is to increase by 7pc this year, and 9.7pc in 2014 while the Consumer Price Index will increase by 1pc this year and by 1.9pc in 2014.

IBEC Head of Policy and Chief Economist Fergal O’Brien said: “It was a difficult start to the year, but there are signs of renewed economic momentum in the economy. Companies say trading has improved in recent months and the good weather, along with positive economic news from the UK and the rest of Europe should help. Consumers, however, remain cautious. It is crucial that the budget sends a clear signal that the end of austerity is in sight.

“The tough austerity programme of recent years means we now have choices that we previously didn’t. Irish taxpayers deserve a break. Plans to increase taxes by E500 million should be dropped. Even if the fiscal adjustment is reduced from E3.1 billion to E2.6 billion we will still reach the 2014 deficit reduction target.”

“We now have an opportunity to fix the property market. Prices have stabilised and new steps to deal with distressed mortgages should help restore a level of normality to the market. Those that can’t pay their mortgage need to be offered new terms and a sustainable solution. Those that can pay, but refuse, need to face up to their obligations or face the consequences. The wider economic and social benefits of a functioning and sustainable property market are enormous. Tough political choices are required, but we need to draw a line under the problems caused by the property crash and move on.”

“Ireland’s economy has the capacity to grow by 3-4pc per year for the next decade, but only if we make the right decisions. Budget 2014 is an opportunity to support consumer confidence and help businesses grow and create jobs. It is vital that the opportunity is not missed.”