IBEC's latest forecast for economic growth would mean that planned budget adjustments should see Ireland able to meet the 8.6% deficit target set by the European Union (EU)/International Monetary Fund (IMF). IBEC issued its findings following a meeting with the Minister for Finance Michael Noonan and the Minister for Public Expenditure and Reform Brendan Howlin.

The group said that a significantly higher figure would do little to aid economic recovery or hasten Ireland's return to international money markets. However, IBEC was clear that the budgetary adjustment should be done in a way that is least damaging to growth and employment. As a result, the focus ought to be on spending cuts, not raising tax. By "sticking to the plan" on the scale of adjustment and doing it in such a way that is less damaging to growth - namely, steering clear of income or business tax increases - the government could provide a much needed boost to consumer and business spending plans for next year.

IBEC argues that the economy performed better than expected in the first half of this year, largely on the back of another very strong period of export growth. Lower bailout interest rates, along with a positive international market reaction to the success Ireland has had in improving its economic situation, have meant that the country is no longer perceived as a state facing insolvency.

As a result, IBEC predicts GDP growth of 1.4% this year and 2.4% in 2012. Economic growth is expected to slow in the latter part of this year, with IBEC pointing to the more uncertain international economic environment as an explanation. On the other hand, the increased competitiveness of Irish exporters means that export growth will be maintained, with the economy projected to still grow in the second half of 2011.

Ireland remains on target to outperform many of its trading partners in 2012, with exports again making a strong contribution to economic growth. IBEC notes that Ireland's exporters are winning customers and market share and remain optimistic about the trading outlook. According to the Q3 IBEC Business Sentiment Survey conducted in September, in the wake of another eurozone crisis, IBEC members’ confidence in their own business had improved. The current conditions index rose to +17 from +14 in Q2 and the forward-looking indicator to +19 from +17. Indeed, IBEC believes 2012 will see the first positive growth contribution from investment since 2007. Lack of spare capacity means that firms will invest more in machinery and equipment, while the construction sector will reach a floor. Following a further decline in total investment of about 8% in 2011, IBEC is forecasting growth of 7% for next year.

IBEC Director General Danny McCoy said: "The government is committed to meeting a 8.6% budget deficit target for 2012, but a EUR3.6bn adjustment should achieve this. A larger budget adjustment risks further damaging the fragile domestic economy. By sticking to the existing plan, the government could provide a much needed boost to consumer and business spending plans for next year."

"The economy performed better than most expected in the first half of this year and Ireland also benefited from a substantial reduction in the interest rates on EU/IMF loans. Our international reputation has strengthened as a result and Ireland is no longer perceived as a state facing insolvency. The focus now must be on reviving the domestic economy. The government must set out a growth strategy to drive the domestic recovery. Despite the financial pressures many are facing, certain categories are saving far more than they would normally do. There is scope in the budget for the government to take decisive steps to encourage more spending in the economy", McCoy concluded.