ESRI holds growth forecast at -8.9%

THE Economic & Social Research Institute (ESRI), the government-funded think tank, has held its growth forecast steady at -8.9% for 2009, for the first time since this recession started to hit home in 2008.

“The broad conclusion to be drawn is that the size of the recession is becoming clearer,” said the ESRI.

In effect, it means that the pace of the recession is slowing down significantly.

“The end of our downward revision does not mean the end of the recession,” the ESRI said.

Alan Barrett, the chief author of the report, said the economy still faced tough challenges ahead before it starts to generate employment and reverse the job losses.

In its report the ESRI says unemployment will peak at 16.1% next year, an improvement on its previous quarterly forecast of 16.8%

“It should be stressed that this change does not result from a more favourable view on possible employment losses. Instead, we expect a faster fall in participation and also a higher rate of outward migration over the period of the forecasts.

“We now expect a net outflow of 40,000 in 2010, partly as a result of a sharp increase in unemployment among non-Irish nationals,” said the ESRI.

Up to 30,000 people are also expected to leave Ireland this year as the unemployment situation continues to worsen, it said.

Overall employment of foreign nationals fell by over 55,000 between Q1 2008 and Q1 2009 while the number of foreign nationals who left the country totalled 20,800.

The figures suggest many of those who came to Ireland are staying because they expect to get further employment or they have put down roots here, the ESRI suggests.

On housing, the bulletin forecasts about 20,000 houses will be built in 2009 followed by 12,000 next year. More importantly it says the price fall in the cost of houses from peak to trough will be over 30%.

The ESRI’s figures are broadly in line with those issued by the Central Bank on Tuesday and share the view that some economic pick up will start to emerge late next year, but that the first full calendar year of economic growth will not be seen until 2011 at the earliest.

That ties in with other assessments of the economy including that of the International Monetary Fund.

The ESRI also makes clear that several key issues have to be resolved by ourselves before we will see any tangible benefits from the fruits of any global upturn.