The Central Bank warned today the terrorist attacks in the US could substantially reduce the growth level forecast for the Irish economy next year, saying the figure may be as low as 3.5 per cent.
In its quarterly report, which was based on data collected prior the World Trade Center attacks, the Central Bank predicted output growth this year would be about 6 per cent. This compares with a figure of 10.4 per cent for last year.
It said: "Most of the year’s growth represents a carryover from last year’s very strong performance".
"The pattern of intra-year growth in 2001 is actually quite weak. Without the same carryover effect in 2002, growth is expected to fall back to 4.5 per cent," it said.
But in a statement accompanying its quarterly bulletin, the Central Bank said if world trade volumes were to be adversely affected - by say 2 or 3 per cent - due to weaker US demand, this could reduce the forecast figure of 4.5 per cent for Irish GNP growth next year to less than 3.5 per cent.
It said: "The precise effect on US consumption is not yet clear, although the most recent confidence indicators suggest a weak picture".
The Central Bank said its estimate "takes some account of the fact that the attacks are likely to disproportionately affect tourism and travel from the US, but the precise impact on Irish tourism sector is difficult to quantify at this point in time".
Expenditure by foreign visitors accounts for euro 3,684 or 4.2 per cent of GNP. Residents in North America contributed about euro 698 million to the economy last year, according to the Central Bank.
Commenting on the recent ECB cut in interest rates the bank said it believes the move will have some impact in mitigating the negative effect of recent events. It said: "The reduction in rates in the US and other countries will assist by reducing the impact on world trade volumes."
However it warned that this action is unlikely to completely offset the negative impact on the Irish economy, unless the fall-out from recent events is rather limited.
