27/08/2010

'Economy Improving' Says Bank, Despite Downgrade

Ulster Bank has announced that improving exports and more consumer spending has led to an improving economy, despite yesterday's downgrading of Ireland's credit rating.

Ulster Bank said today it was revising its forecasts for Irish economic growth in 2010 upwards, predicts average annual GDP growth of 1%, up from -0.5% previously.

The bank said it also says the food and beverage sector is recovering.

The economic update from the bank said output and exports of the Irish multi-national sector was a major driver of the return to positive quarterly GDP growth in the first quarter of this year.

However, this morning, Fine Gael's Michael Noonan was less than positive over Ireland's economic situation, saying yesterday's downgrade to Ireland’s credit rating was a "hammer blow to the economy”.

International credit agency, Standard & Poor yesterday announced it would be downgrading Ireland's credit rating from AA to AA-. Standard & Poor said the rising cost of bailing out the banking sector was behind the decision adding that the cost of supporting the banks would weaken the Government's financial flexibility over the medium term.

The ratings agency said the cost of the bank bailouts could be as high as €50bn and it has added the €40bn NAMA will spend into the national debt.

The Opposition Finance Spokesman Michael Noonan said Standard & Poor’s decision was already having a serious adverse effect.

"The deterioration in Ireland’s credit rating is due to the Government’s failed banking policy. In particular, confidence is being undermined due to uncertainty over the final cost of the bank rescue.

"Anglo Irish Bank is central to the issue. It is now two years since the Government guaranteed all Anglo Irish liabilities, and yet the final cost of the bank rescue is still not known."

Mr Noonan called on Finance Minister Brian Lenihan to give certainty to the markets and to provide a final figure on the cost of the bank rescue.

(DW/GK)


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