Ireland’s gross domestic product (GDP) is expected to grow 10% this year, according to Davy, who has more than doubled his projection.
“We have revised our forecast for Irish GDP growth upwards to 10% in 2021 from 4.8% previously,” the group said on Monday.
The upward revision is mainly explained by the dynamism of the export sectors and multinationals, but also because the local economy “is behaving better than expected”.
“The contraction in early 2021 was shallower than we feared, and a rapid and clear rebound took place in the third quarter as Ireland’s successful Covid-19 vaccination program lifted trade restrictions, with further easing to come in the second half of the year, ”he said.
Davy said the export and multinational sectors “remain impervious” to any disruption related to Covid-19.
However, a “strong rebound” is now also underway in the indigenous economy following the relaxed restrictions of Covid-19 and good progress in vaccinations.
“As a result, we have revised our forecast for local sector production growth upwards to 5% in 2021 from 2.7% previously, with activity returning to pre-pandemic levels in early 2022,” he said. Davy said.
Ireland’s vaccination schedule has now overtaken that of the UK, with a higher proportion of the population fully vaccinated or having received their first dose and the remaining restrictions soon to be lifted.
Data on card spending and jobless claims show an ‘exceptionally strong’ rebound, with Irish PMI surveys now at their highest level ever.
“We expect an exceptionally strong rebound in consumer spending, up 6.5% in the second quarter, 5.5% in the third and close to pre-pandemic levels in the last quarter,” Davy continued.
He added that the lack of a tax hike in the October budget will support spending until 2022.
“We expect Irish residential property price inflation to be 8% in 2021 and 3.5% in 2022,” he said.
“Although the housing market has tightened, we are still forecasting mortgages of € 10 billion in 2021 and € 11.2 billion in 2022, up from € 8.4 billion in 2020. Core investment is expected to rebound from a 1.5 percent contraction in 2020, up 4 percent in 2021.
“Home completions are expected to reach 22,000 in 2021 and 26,000 in 2022. The Irish equity loan program, which is expected to be announced in the coming weeks, could present upside risks to our housing market forecast. “