Do you think 2011 was a bad year? Well, the worse is still to come

SINCE 1764 pundits attempt to accurately predict Ireland’s events of each New Year. Best known of these is Old Moore’s Almanac, established by Theophilus Moore, a clerical academic from Milltown, Dublin.

Despite lacking his perspicacity, let me chart our course ahead. Met Éireann generally, Evelyn Cusack in particular, constantly remind us that long range weather forecasting (beyond six days) is bunkum. They are right. Soothsayers’ suggestions of scorching summers or snowy winters transpire to be nonsense.

Economic prospects? A fifth consecutive year of contracting GNP looks likely. Negatives outweigh positives. Spending power by consumers has to tighten. The inevitable impact of additional living costs is reckoned to be more than €2,000 per household. These comprise: higher commuting costs (eg public transport fares, car parking charges, tolls, fuel and insurance); dearer health insurance & college fees; new household charge; higher VAT; reduced drug refunds and child benefit cuts. Cash is being sucked by the state out of people’s pockets and won’t be available as revenue for businesses in the domestic service economy. In turn, investment by business will abate and incomes stagnate.

The construction sector will decline further. 200,000 jobs have been lost off building sites. As existing projects are finalised, less new starts are initiated. Surplus ghost housing estates, empty office blocks and vacated retail units mean minimal demand for new construction activity. Property prices fell by 16% last year. Considerable variations occur within this overall trend. Worst affected are holiday homes, houses located outside of cities and apartments. The market has yet to attain a floor. Predictions vary between a further 15%-30% drop. The critical factor, beyond supply and demand, is the reduction in mortgage finance from €40bn-€2.5bn between 2006 and 2011.

Unemployment stands at 14.4% of the workforce with the live register hovering around 450,000. Annual net emigration exceeds 40,000. A major shakeout and rationalisation in financial services is inevitable this year. Four indigenous and two foreign lenders will disappear. Consequently retail networks will ensure significant branch closures. Downsizing of all lending operations must mean thousands of white collar redundancies. Related services such as insurance and mortgage brokerages will experience significant withdrawal of capacity. 16,000 employees will depart the public sector.

The positives? Agri-food is enjoying 60% higher returns than the disastrous year of 2009. Gross sectoral output of €24bn is set fair for more growth. Improved competitiveness, on farm productivity and scaled investment will yield incremental improvement beyond CAP reform in 2014. Tourism enjoyed a 7% increase in visitor numbers in 2011. With foreign earnings at €3.3bn, it is still well down on the peak of 2007. This inward traffic should increase by a similar amount, but significant restructuring of hotels is inevitable. Technology enterprises are big corporate winners. All forms of social media can anticipate a decade of spectacular success. The “Skype generation” is migrating most behavioural patterns on line.

Grave uncertainty for our open trading economy relates to global demand for exports. Can 16% growth be maintained, while the eurozone is in the grip of a credit crisis? This double dip dilemma has its root causes in un-sustainability of sovereign finances and insolvent European banks. The best news was replacement of ECB boss Trichet by Draghi, with significant interest rate reductions (likely to go as low as 0.75%) and €500bn of medium term bank liquidity. Great white hope of the EFSF transforming into Eurobonds is still a distant prospect, due to German intransigence. €1.9 trillion is required to maintain credibility in the euro. Markets observe greater risk and less credit worthiness. Flight of capital within the eurozone from the periphery to the core countries will worsen. France is set to lose its triple A status, as rating agencies announce credit downgrades throughout the year.

European politics is the most important show in town. Most interesting moving part on the euro stage will be the French presidential election. Nicolas Sarkozy faces prospects of defeat at the hands of socialist candidate François Hollande. Bookies make the incumbent odds against survival. Good riddance. This should alter the Franco-German domination of EU leadership. Merkel must wait until September 2013 for her electoral fate. Change of administration in Paris can result in the reality in Frankfurt of orderly structural bond default. The game of pretence can finally end, leaving behind the paralysis of the credit crunch. Greek and other debts will simply not be honoured.

Domestic politics promises to be rather dull and dreary, without electoral contests. Expect lots more amateur dramatics inside the cabinet and dormant Dáil. Referendums on the euro fiscal compact, abolition of the Senate and Children’s rights are due to be held. Doubtless, if the electorate gets the result wrong, they will be asked to resit the paper until they reach correct conclusions. The Referendum Commission should be renamed Confusion Commission. Dubious doubts about legal texts or hypothetical consequences are magnified beyond belief. It’s a brave punter who would bet on any proposition gaining acceptance in a plebiscite. A rocky road of rejection lies ahead as voters are sour, suspicious and sceptical.

Real excitement of the political variety will come from the US. President Barack Obama encounters the voters on 6th November. Odds of 4/5 indicate on balance he should win. Six of the last eight outgoing presidents secured re-election. Despite failing to match unreal expectations of 2008, he appears the victor by default. The Republican Party seems deeply divided. Fleeting possibilities of opportunity for Newt Gingrich and Ron Paul may be illusory, as Mitt Romney has the biggest cash pile and most road miles of campaign experience. Obama can beat Romney. The interim upside for all is that the American economy isn’t allowed slide into recession in an election year.

Any escapism out there to lighten the mood of depression? Anticipate a new official Fáilte Ireland festival of kite flying in November when cabinet ministers scaremonger for the 2013 budget. “Yawn of the Year” is likely to be the 50th anniversary of RTÉ television — past and present RTÉ heads endlessly talking introspectively to each other in an orgy of self congratulation. London Olympics should yield medal glory for boxers Katie Taylor, Kenneth Egan and John Joe Nevin. Cork for Sam and Tipp for Liam can provide a Munster double. Euro 2012 will be the “Hype of the Year” after a 0-0 draw with Croatia. Spain (most likely winner) and Italy will advance from the group. The Green Army for an early bath, yet Trapp’s men will be welcomed home as heroes.

In summary, worse is still to come. Recession fatigue spells sharp unpopularity for Enda Kenny, Eamon Gilmore and their respective parties. Backbenchers on electoral death row will bellyache and mutter disloyalty. Pace of business insolvencies will quicken. Mortgage misery will heighten as the clock on repossession moratoriums ticks down. Then again, we are already conditioned for this unremitting gloom. So, our personal survival techniques have attuned us to disregard these realities as background noise. Key advice is to keep both feet out of the grave — it’s not the end, only endless.