EU says worst is over for Ireland

THE worst is over and the Irish economy is recovering was the good news from the EU’s economics chief.

Forecasting better than expected growth for next year, thanks to a strong recovery in other parts of the world and especially Asia, Ollie Rehn warned that the EU was not out of the woods yet.

The EU believes Ireland’s economy will grow by 3% next year, compared with average EU growth of 1%.

He praised what he described as Ireland’s “very bold and credible measures” to get its accounts in order over the past two years and said this was paying off in terms of an economic recovery. “I would agree with Minister [Brian] Lenihan that the worst is over and the Irish economy is in recovery,” he said, but he added a stark warning that the country cannot let up.

“It is essential Ireland continues to be vigilant with fiscal consolidation, and if required take even further measures,” he said.

Domestic demand remains the main cause of the recession, but the European Commission believes that with the pace of job losses slowing, confidence will pick up and next year should see disposable income and consumption growing. However, the bad news is that there will continue to be job losses for some months yet. Unemployment is expected to peak at 13.75% this year, with young and low-skilled workers being hardest hit.

There is no sign of good news for the construction sector with the forecast saying the drastic downsizing will continue well into this year with investment falling back 60% from it’s 2006 peak.

In other good news, chemical and pharmaceutical exports are set to expand this year and gather strength in 2011.

The forecast has not taken into account the effect capital injections into NAMA and Anglo Irish Bank will have on the public finances.