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IBEC expects economy to grow and unemployment to fall

IBEC is forecasting strong growth in the Irish economy this year.

The employers group says it expects GDP to be 5.4%, up from its previous estimate of 4.8% at the end of last year.

It also says unemployment will fall below 9% in 2015.

Chief Economist at IBEC, Fergal O’Brien, has given three reasons why they have decided to revise their growth forecast upwards.

He said: “The Irish economy has performed strongly again in the first quarter of the year.

“This morning IBEC are actually upgrading their economic forecast for 2015, we think GDP growth will be just short of 5.5%, which is a bit higher than we would have thought three months ago.

“There’s a trio of factors: beneficial exchange rates, the impact of quantitative easing and lower oil prices.”

Latest figures show the unemployment rate at just over 10%, with more than 355,000 people signing on the dole.

But Fergal O’Brien, chief economist at Ibec, said the knock on effects will be felt by different workers at different times.

“Economic growth will in time translate into pay increases across the economy, but different sectors and companies are recovering at different rates,” he said.

“Two-thirds of domestic services companies and half of traditional manufacturing companies are unable to afford pay increases this year.”

A dramatic fall in the value of the euro against other currencies remains a “major bonus” for Irish businesses exporting goods overseas, the report notes.

“Ireland will benefit more than any other eurozone country because of the high level of trade with the UK and US, but the increased cost of some imports will offset a portion of the benefits,” said Mr O’Brien.

“These higher import costs are also likely to feed through to consumer prices over the coming months.”

In its quarterly forecast, Ibec is calling on the Government to prioritise cuts to the marginal tax rate for all workers and “ambitious” investment in capital projects, education and innovation over the coming year.

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