Growth down, inflation up, but no recession - BoI

Bank of Ireland has reduced its forecast for GDP economic growth from 2.8% to 1.6% for this year.

Higher oil prices, the rising rate of inflation, softer export expansion and more restrained consumer spending are expected to result in slower growth than had been expected.

The bank said higher energy costs mean that inflation will be 3.3% this year compared to 2.2% last year.

Despite the lower growth forecast it said that oil prices of €100 would not push Ireland into recession.

The bank said growth in the jobs market would remain robust and employment would expand by 1.8% this year.

It expects 37,500 homes to be built in 2026 – a slight increase on last year's figures of 36,000 but still well short of the more than 50,000 units needed annually to have a significant impact on the housing crisis.

It forecasts that house prices will increase by 4% this year.

It added Government surplus of €9 bn would provide a "safety buffer" for the public finances if further supports for consumers and businesses are required to deal with rising energy costs.

Bank of Ireland said a "key uncertainty" is the timing of an increase in the household gas and electricity bills.

The bank said it assumed a 10% rise in these prices.

Conall Mac Coille, Group Chief Economist, Bank of Ireland said: "While the recent rise in oil and energy prices towards $100 per barrel represents an unwelcome squeeze on household real incomes and consumer spending, the Irish economy is expected to show the same resilience demonstrated during Brexit, the Covid‑19 pandemic, and the energy shock that followed Russia’s invasion of Ukraine.

He added: "There are enormous risks - 20% of global oil supply remains cut off."