Economy to bounce back with 2.8% GDP growth next year, report predicts

THE economy is emerging from recession and will achieve the second highest GDP growth of 2.8% in 2011, behind Slovakia on 4%.

Growth this year will be -1% according to the Economic Eye forecast produced twice a year by consultancy group Ernst & Young.

In an upbeat assessment of the economic outlook, Neil Gibson, special adviser to the group, said Ireland should distance itself from the so-called “PIIGS” countries including Spain, Portugal, Italy and Greece.

“Ireland is not Greece,” he said at a news conference in Dublin yesterday to launch the all-Ireland report.

“Ireland has key economic competitive advantages which will ensure its emergence from association with this group,” he said.

Though worst in terms of its fiscal deficit in 2009 at 14% “it is top of the Eurozone league for graduate skills in the 25-34 age group, has the fastest rate of price correction (CPI 4.5% in 2009) boosting cost competitiveness and is second in export orientation at 87% (behind Luxembourg and joint with Malta).

Those advantages set us apart from the other weaker economies and should ensure economic stability in the years ahead.

Those fundamentals backed by our low corporation tax and the early decisive fiscal action taken by the Government “lie behind the more optimistic medium term outlook for the ROI economy”, he said.

Mr Gibson warned there were risks to the downside and if export growth, which will be the engine of the recovery for several years is hit due to weaker global demand, the possibility of a 6% economic decline in the current year was a distinct possibility.

With construction gone as a driver of growth and no domestic activity to take up the slack, he warned it will be 2022 before we get back to the levels of employment enjoyed at the peak of the boom in 2007. Taking an all-Ireland view, 300,000 jobs were lost through the depression.The labour market continues to contract and the Republic will not get back to peak 2007 job levels until 2022. Northern Ireland will get there by 2017.

In the Republic, unemployment has risen by 160,000 since the start of 2008 to the end of last year.

Of that, 56% of the total increase involved those in the “prime working age” of 25-44. The percentages are slightly higher in NI and contrast sharply to previous recessions which have tended to impact older people from 44 years and upwards, he said.

Looking ahead, the business services sector, including software and consultancy, will be huge drivers of jobs growth out to 2020 with 100,000 net new jobs on the cards.

The other good news is that in terms of foreign investment the country remains an attractive location.