DUBLIN |
DUBLIN (Reuters) - Ireland's government debt will peak a percentage point higher than previously expected next year after Dublin cut its growth forecasts for 2012 on Friday and also trimmed its outlook for next year.
Dublin's success in cutting the largest budget deficit in Europe and shrinking its banks have distinguished it from fellow euro bailout recipients Greece and Portugal but it desperately needs consistent growth to eat into a debt pile now set to peak at 120.3 percent of gross domestic product (GDP) next year.
The government said GDP would increase by 0.7 percent this year and not 1.3 percent as previously forecast due to further damaging effects from a slowdown in Ireland's trading partners that has already dragged the country back into recession.
That brought it closer to the 0.5 percent growth projected by its bailout lenders and an average 0.2 percent seen by 26 Irish and European economists surveyed by Reuters this week.
The government also trimmed its forecast for GDP growth next year to 2.2 percent from 2.4 percent previously and still sees the economy growing by 3 percent in 2013 and 2014 after a prolonged fall in domestic demand finally bottoms out.
The economists polled by Reuters predict growth of 1.5 percent next year.
However the country's finance ministry said the "robust and more sustainable growth foreseen" would reduce Ireland's debt-to-GDP ratio to 119.5 percent in 2014 and 117.4 percent in 2015 as prudent budgetary measures continued to be implemented.
Ireland's finance minister Michael Noonan said the country remained committed to reducing its budget deficit to under 3 percent by 2015 from an underlying figure of 9.4 percent at the end of 2011.
(Reporting by Padraic Halpin; Editing by Ruth Pitchford)
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