Republic’s recovery predicted to start in 2011

THE economy is in the grip of a depression having fallen by more than 10% from its peak during the current slump.

A new all-Ireland report says the Republic will recover faster than Northern Ireland, driven by its strong infrastructure and its solid export-led services. Recovery should start in 2011, the Ernst & Young report stated.

In the meantime, unemployment will rise by 250,000 with the Republic accounting for 230,000 of that figure over the three- year period to end 2010.

The first all-island forecast predicts a near 8% GDP contraction in 2009, with the southern economy to be in technical depression before strong recovery from 2011 onwards.

This year GDP in the Republic will fall by 8.9%, and it could be a full 12 years before the employment numbers recover to their 2007 peak, the report says.

It confirms also that the all-Island economy is in the midst of the most severe recession since the WWII.

For many people and locations “the recession will have a generational impact and bring severe economic and social hardship to many”.

The impact of the recession on business, society and government will also be more severe than previously anticipated with an 8.9% economic contraction forecast for the Republic in 2009, 2.9% for Northern Ireland and an overall all-island contraction of 7.8%.

Brendan Lynch, special adviser to the Ernst & Young Economic Eye report, said: “The island economy is in the eye of an unprecedented economic storm and collateral damage is severe.”

Early 2009 looks like being the worst period of the downturn. He warned “recovery will be slow and the storm will leave scars on the economic landscape for years”.

If the two economies are to get back on their feet “competitiveness remains key”.

Business growth will be crucial to any recovery because “neither consumers nor government are in any position to spend aggressively”.

The scale of job losses in construction across theisland by end 2009 “isstaggering, with an estimated 150,000 jobs to be lost in construction across both regions from their peak. Recession in the south will be far worse than in Northern Ireland.

Neil Gibson, another Ernst & Young adviser on the report, said in a telephone interview with the Irish Examiner that while “the downturn in the south was steep, recovery will be strong” when it starts to kick in.

The solid infrastructure built up in recent years and the emergence of the internationally traded services sector that accounts for 44% of total exports will be “key” in driving the recovery, he said.