Irish Think Tank Sees Export Weighing On Growth

--ESRI estimates Irish GDP growth of 0.9% for last year, below prior forecast of 2.2%
--Predicts GDP growth of 0.9% for 2012
--Forecasts Irish export growth to slow to 3.4% this year from 4.4% in 2011

DUBLIN -- Ireland's leading think tank Friday predicted the Irish economy will continue to grow this year and in 2013, but its recovery from its debt crisis will be weighed by slowing demand from Europe for its exports and by the austerity of its bailout program at home.

"In the two regions that are of great importance in trade terms for Ireland -- the euro zone and the U.K. -- the country is facing weak or declining demand," said senior economist David Duffy at the Economic and Social Research Institute. "The overall picture is weak."

The ESRI has for some time been among the most optimistic that Ireland's export-focused economy would spur a strong recovery, but the euro-zone crisis, and now looming austerity in the U.K., have severely curtailed such hopes, it says.

In its latest quarterly report, the ESRI estimated Irish gross domestic product increased only 0.9% last year, down from the 2.2% growth it predicted in November, because the euro zone has slowed Ireland's export growth engine.

For 2012, it expects Irish GDP will expand by 0.9%, unchanged from its earlier forecast, as the economy continues to be held back by slowing export growth.

The ESRI expects Irish export growth will slow this year to 3.4% from 4.4% in 2011 and from the 6.3% growth posted in 2010. Exports will grow 3.8% in 2013, it says.

The Irish government can't do much to stimulate the economy because it faces having to bring in more spending cuts and tax increases. Consumer spending will contract through 2013, says the think tank.

Irish unemployment will fall only slightly to 14% this year from 14.2% last year, and will stay high at 13.7% in 2013. It would be higher again but for a net outward migration of people, it adds.

However, Duffy said a corner of sorts has been turned: the prospects are for the Irish economy to do better, not worse, than the think tank's current predictions.

Furthermore, the ESRI predicts that despite the euro-zone crisis, the Irish government will meet its obligation to its bailout lenders to reduce its budget deficit to 8.6% of GDP this year from about 9.8% last year.

Overwhelmed by the debts of its banks, Ireland was forced to turn to the European Union and International Monetary Fund for EUR67.5 billion in bailout loans in November 2010.

The ESRI predicts the country is on course to get back to market funding in 2013.

Meanwhile, the ESRI expects euro-zone leaders will continue to "muddle through" the debt crisis, with the bloc's economy likely to be weak for the next few years, and its banks needing to be recapitalized.