IBEC has significantly brightened its forecasts for Irish economic recovery, saying that the country is beginning to pull out of recession faster than expected.
The employers’ representative organisation is now forecasting contraction of 0.7% in Ireland’s GDP this year, adding that growth of 2.1% is achievable in 2011.
Previously, IBEC had felt the economy would shrink 1.6% in 2010 and grow only 1.7% in 2011. Speaking ahead of the launch of the body’s latest quarterly economic trends report, IBEC’s director general Danny McCoy said the more optimistic outlook and restoration of confidence comes from the Government’s "tough action to stabilise the public finances".
"The harsh corrective action taken in the budget is re-establishing Ireland’s credibility in international financial markets.
"This is reflected in Irish bond yield spreads over German 10-year bonds since the budget, which have stabilised and even narrowed – in contrast to Greece, Spain and Portugal, where spreads widened. The reward for this recognition is tangible. The cost of borrowing for Government debt has reduced and the Government’s ability to raise debt has eased," he said.
Mr McCoy also warned against anything – particularly more strike action threats – that may erode Ireland’s recovering international image.
"This hard-won credibility must be sustained. Financial markets are ruthless in their pursuit of any perceived weakness and the Irish economy remains in the spotlight.
"Any deviation from current economic targets will be punished by higher interest rates and credit restrictions."
He added: "Trade unions should be aware that threats of industrial action gain international notice and could rapidly undo the credibility that has been established.
"So far, Ireland has demonstrated the flexibility of its labour market. In both the public and private sectors there have been wage reductions, pay freezes and changes in work practices. This was necessary.
"Wages had increased much more rapidly in Ireland than in the euro area from 2002-2008, precipitating a serious competitiveness decline.
"As a result, unit labour costs increased by 31% in the period, compared with an increase of 9% in the euro area," he said.
IBEC has also reiterated its call on Government to maintain investment in skills, technology and infrastructure.
a d v e r t i s e m e n t
This appeared in the printed version of the Irish Examiner Monday, March 15, 2010
