MULTINATIONAL companies and exporters are once again expected to power economic growth here this year, according to stockbrokers Davy which has doubled its gross domestic product forecast to 10pc.
Davy economist Conall Mac Coille said in a report published yesterday that the domestic market is also set to see a rapid bounce back, buoyed by pent-up consumer demand that will accelerate into next year thanks to the absence of austerity-style tax increases in October’s Budget.
Davy had been looking for 4.8pc gross domestic product growth this year.
Its new forecast would represent the highest annual growth figure since 1999, with the exception of 2015.
Davy’s new forecast for domestic growth is for a rise of 5.2pc in 2021, almost double its previous estimate.
The firm says that the domestic economy could expand by more than 6pc next year, thanks to the rapid roll out of vaccines and the evidence from May to July of higher spending as restrictions eased.
Mr Mac Coille pointed to the “exceptionally sharp” rebound since May when Covid-19 restrictions started to ease which he says can be seen in credit and debit card spending, falling jobless claims, buoyant tax receipts and record purchases managers index survey readings.
The broker is now forecasting an “exceptionally strong” rebound in consumer spending, which it expects to be close to pre-pandemic levels by quarter four this year.
The Department of Finance is expecting GDP growth of 8.8pc this year and 5.1pc in 2022.
Davy anticipates unemployment this year to average 17.5pc and to fall to 9.9pc in 2022. Those rates are significantly above pre-pandemic levels and indicate that some sectors of the economy face months and even years of difficulty.
Its figures are slightly less optimistic than the Government’s, which project unemployment of 16.3pc this year and 8.2pc in 2022.
However, Davy notes some difficulties tracking unemployment trends coming out of the pandemic, with some double counting in the official statistics as a result of the mix of traditional job seeker and pandemic unemployment payment (PUP) claims, the possible inclusion of fraudulent claims and the fact that many students, who would not normally be classed as unemployed are receiving benefits under emergency schemes.
Taken on their own though, PUP claims had fallen to 163,000 by early August, down from 480,000 in February with people coming off the scheme as the economy reopens.
Davy is less optimistic on housing and says problems of under-supply will persist.
Housing completions are forecast at 22,000 this year and 26,000 in 2022, well below levels of demand.
Lack of supply will mean higher house prices, tipped to grow 8pc this year and 3.5pc in 2022 by Mr Mac Coille.
“Although the housing market has tightened, we still see mortgage lending of €10bn in 2021 and €11.2bn in 2022, up from €8.4bn in 2020,” he said.