Wednesday, 1 August 2012

Falling interest rates will cut mortgage costs while a weakened Euro will help boost economy in Ireland

Business group IBEC claim that despite difficult international market conditions, the economy is still set to expand by about 1pc this year. It is believed that Ireland is set to benefit more than any other eurozone country from the weaker euro, ensuring exports drive gross domestic product (GDP) values up.

In their latest quarterly economic outlook forecast, IBEC has predicted that falling interest rates will cause average mortgage costs to be cut by €2,000 this year, thus freeing up more money for families to spend.

However IBEC have said that consumer spending remains very weak and poor weather would further hit the domestic economy.

"International trading conditions are tough at the moment given the sharp slowdown in almost all markets since the start of the year, but Irish exporters are faring relatively well...The weaker euro is a major positive for Ireland...When coupled with the hard gained competitiveness improvements of recent years, it means that Irish companies can grow both revenues and market share in what are largely stagnant international markets." said Fergal O’Brien,chief economist.

Elsewhere the annual average euro exchange rate this year against both the dollar and sterling is likely to be about 10% weaker than in 2011.

However Mr O'Brien has said that Ireland sold 62pc of its exports to markets outside the eurozone last year, well above the average for other member states.

"The Irish economy will benefit more from this than any other eurozone country," he continued.
"This year, for the first time since 2007, the investment sector of the economy will not be a drag on growth...The improvement arises mainly from increased investment by firms in equipment and machinery, while construction sector activity is also closer to bottoming out."

Ibec said last week's successful bond auction also shows the substantial improvement in Ireland's reputation with international investors over the past year.

"Markets are responding to sensible policy decisions, namely the yes vote in the recent Fiscal Stability Treaty referendum and strong implementation of the Memorandum of Understanding with the troika," Mr O'Brien added.
"The major task for Government now is to restore activity in the domestic economy and get more people back to work."

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