Signs of recovery do not mean pain is over
The Washington-based IMF said in its semi-annual World Economic Outlook that the global economy will expand by 3.1% in 2010, better than its July forecast of 2.5%.
China’s economy, set to grow by 9% and India’s, by 6.4%, will provide the engine of global economic renewal, said the IMF.
Those figures compare with growth of 1.7% for Japan, 1.5% for the US and 0.35% for the euro region overall, with Germany and France leading the modest pick up in the eurozone area.
The global pick up has caught most forecasters off guard. For this year the IMF is now saying global growth will fall by just 1.1%, not the 1.3% it indicated in its previous assessment. However, the IMF said, the rebound would be sluggish, constrained by lack of credit, while jobs growth would be quite slow for some time.
Earlier in the week, ahead of the more upbeat IMF analysis, senior economist Rossa White of Davy Research jumped in with a prediction that the Irish economy will grow by 4% in GNP terms in 2011. That is above trend growth for Ireland.
He also said the depression could be over by the end of the year.
White is forecasting modest growth of 0.5% on average in 2010, before an impressive growth figure of 4% in 2011.
Most major forecasters, including the Central Bank, due to publish its next review on Tuesday, have offered a much more depressed economic forecast for the next two years.
In July, the Central Bank said the economy would continue to decline next year while the government think-tank the ESRI is expecting further shrinkage of 2.3% measured in GNP terms next year, followed by a modest pick up in 2011.
John FitzGerald of the ESRI said if the cost base isn’t tackled the turnaround that seems to be gaining currency with some analysts could be “a long and painful process”.
He didn’t expect there would be a major turnaround this year or next, adding it could take the economy until 2012 to deliver a realistic up-turn.
Spelling it out to the delegates at the annual conference of the Small Firms Association, Mr FitzGerald said unemployment would not peak until sometime in 2011 while it would take until 2015 to get us back close to full employment.
Mr FitzGerald added we needed a banking system that works and a December budget that tackles head on the cost issues facing theexchequer.
Barclays Capital director Paul Robinson told clients of the bank in Dublin this week that while the worst of the recession may be over, the Irish economy will still decline in 2010. Thereafter, he said, it could be 2013 before it starts to show any real growth.
Those desperate for a quick return to the good old days would do well to bear in mind that, even if there is a recovery, the problems of credit scarcity and the property bubble will continue to cast a long shadow over Ireland’s economy.
On that basis there are grounds for being a lot more circumspect about what lies in store, including a pretty savage budget if the Government holds its nerve.
And even if Rossa White is correct in his analysis, the fall-out from this depression will be felt for quite some time. Statistics alone cannot ease the pain of the thousands now out of work or improve the lot of those on the margins.
On the other hand we have to move on. White was a stern critic as the property bubble burst and pulled no punches. He was right about that, so hopefully his new-found optimism will also prove to be accurate.
