Ireland’s economy may have reached a turning point, according to the European Commission – which predicts we could experience rapid growth by the end of the year as consumers start to spend again.
The EC forecasts that our economy could grow faster than the rest of Europe, expanding by 1.1pc this year. But it warned that the Government must continue with its austerity budgets until 2015, cutting spending and raising taxes after the bailout ends later this year.
“It will be critical for authorities to avoid complacency and strictly follow the objectives of the EU-IMF programme in 2013, as well as after December 31, 2013, when the programme expires,” the report said.
Several politicians from within the Coalition and the opposition have called for more spending next year.
The EC growth figure mirrors a separate forecast by the Paris-based Organisation of Economic Co-operation and Development (OECD), which said yesterday that the economy would expand by 1pc this year.
However, the commission criticised recent cuts in health spending, which it said had failed to address structural issues. It said further cuts were needed to stop spending running out of control.
The commission warned that the condition of the banking sector continued to pose a threat to the economy as a whole. It said: “More forceful action is required to address the still high and growing level of non-performing loans.”
It also warned about the slow progress in tackling problem mortgages and SME loans, saying: “These factors make it all the more important to step up efforts to establish an operational credit register before the end of 2013.”
Unemployment is likely to stay above 13pc this year, with youth unemployment and long-term unemployment remaining particularly high, it said.
In Paris, Tanaiste Eamon Gilmore said the State had reached agreement with the OECD to develop an action plan to tackle youth unemployment.
Meanwhile, the State will have to borrow about €6bn less in 2015 under the deal to extend the repayment period on some of Ireland’s EU bailout loans.
In 2016, it will have to borrow €4.2bn less, €3.9bn less in 2018, €1bn less in 2019 and €3bn less in both 2021 and 2022.
EU finance ministers agreed in April to grant both Ireland and Portugal more time to pay their bailout loans.
The deal would reduce the amount we would have to borrow from the markets between 2015 and 2022 by €20bn.
Finance Minister Michael Noonan said: “While the reduction in the refinancing requirement varies from year to year, the expected amended profiles would see Ireland’s market refinancing requirement reduced from €10.6bn to €4.4bn in 2015.”
Thomas Molloy and Colm Kelpie – Irish Independent