Ireland’s recession will deepen next year with the downturn compounded by soaring unemployment, the country’s leading economic think-tank predicted today.
In its quarterly report, the Economic and Social Research Institute (ESRI) said it was forced to radically revise its forecast for 2009 from one of modest growth to decline given the extent of the financial crisis at home and abroad.
The body blamed the crumbling housing market for the economic difficulties at home and said a fall-off in government spending and a downturn in commercial building is expected next year.
Exchequer figures last week showed a massive deficit in the public finances for the nine months to the end of September. The ESRI said the Government is facing a budget deficit of around 5.5% this year.
The report predicted that deficit will continue into 2009 and that stabilising it would require severe cuts in spending and tax increases, which will add to the downturn.
It predicts unemployment will soar to an average of 8% next year, compared with a figure of 6.1% estimated for 2008.
The number of people in work is expected to have fallen by 14,000 by the end of the year and by a massive 47,000 in 2009.
The think-tank said Gross National Product – the total value of goods and services produced in the economy over a period of time – is expected to fall by 1.3% this year, down from its summer forecast of 0.4%.
The body originally forecast GNP would grow by almost 2% next year but revised its estimate and is now predicting it will fall by 0.7%.
The ESRI said the commentary had been prepared at a time when the world’s financial markets are in a state of unprecedented turmoil.
Other economic factors within Ireland which impacted upon the analysis included “disastrous” third quarter Exchequer returns and an “alarming” rise in the numbers on the Live Register.
Numbers claiming unemployment benefits soared by almost 50% in the last year breaking all annual rise records since 1967, it was revealed last week.
The Live Register figures from the Central Statistics Office showed those seeking state support rose by a record 49.5% since September 2007, with the seasonally adjusted figure at 244,500 last month, up 9,400 from August.
“Given this background, it is unsurprising that the forecasts in this commentary contain downward revisions to our previous forecasts,” the ESRI report states.
“It is also unsurprising that we need to emphasise the uncertainty surrounding the forecasts and the possibility that further downward revisions may be applied.”