Irish economic think-tank cuts growth forecasts

DUBLIN, Oct 10 (AFP) - Ireland's leading economic think-tank has cut its gross domestic product growth forecast for the country's economy this year to 2.2 percent in its latest commentary published on Friday.

The Economic and Social Research Institute (ESRI) had previously predicted GDP growth of 2.6 percent.

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The institute has also downgraded its forecast for gross national product (GNP) growth -- regarded by the government as a more accurate measure of Ireland's economic performance because it strips out substantial repatriated foreign investment profits -- from 2.4 percent to 1.9 percent.

Next year the economy will pick up but will still be "significantly below potential", growing at 3.1 percent for GDP and 3.2 percent for GNP, ESRI said.

The commentary says that while labour market conditions are deteriorating this year the situation is not as bad as had been expected "given the lagged impact of an economy growing below its potential".

"We forecast the employment rate to average 4.7 percent in 2003 and 5.1 percent in 2004.

"Inflationary pressures are expected to continue to unwind and we expect consumer price growth to decline from an annual average of 3.7 percent in 2003 to 2.6 percent in 2004."

The institute says the re-emergence of government deficits does not constitute a "problematic development" but will mean that the budget next December will have to be framed to support the economy in returning towards its potential growth rates -- while ensuring that all public expenditure constitutes value for money.

It says there will be difficulties in securing a continuation of Ireland's social partnership wage agreements that will deliver sustainable productivity-justified pay.

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