Ireland's domestic economy will expand for the first time in five years in 2013 but weakness of its main export markets will mean overall growth is weaker than previously forecast, a state-funded research body said on Thursday.
The Economic and Social Research Institute (ESRI) said it will be tough for Dublin to meet targets set under its EU nad IMF bailout, on which it is already struggling given European Central Bank resistance to a reordering of some of its debt.
Ireland and Portugal's steady progress on their bailout programmes have been relative bright spots in the euro zone's debt crisis in recent months, but their economies are still battling to escape recession in the face of the scything budget cuts those programmes require.
The ESRI predicts a mixed picture for 2013, with gross domestic product (GDP) forecast at 1.3 per cent, matching the Irish Central Bank's predictions made this week.
"Final outturn for growth over the forecast period is heavily conditional on the performance of the European economy, which at present is very weak," the ERSI's latest quarterly bulletin said.
The thinktank said growth in the domestic economy would be driven mainly by business investment, although domestic demand overall would remain very weak.
The predictions follow latest unemployment figures that showed the number of people claiming unemployment benefit edged down in January, falling for the seventh successive month.
The body, which is independent but partly funded by the Irish finance ministry, said that it expects stabilisation in employment and the labour market over the next two years, with emigration being the main factor in the reduction.