Short-term prospects for economy ‘precarious’

THE Economic and Social Research Institute (ESRI) has warned the economy grew by just 0.25% this year while the domestic side will “continue to shrink”.

It says growth next year will be around 2.25% but huge uncertainties surround its forecasts.

The cystallisation of the Government’s banking losses at €25 billion and the continuing difficulties with sovereign debt markets across Europe suggest “the short term prospects for the Irish economy continue to be precarious.”

It also reveals that 120,000 will leave the country between this year and next and that long term unemployment is turning into a serious crisis that require urgent action.

Growth will be driven this year and next mainly by the exporting segment of the economy comprised mainly of foreign multinationals. In its analysis the ESRI said recovery this year and next will be jobless. Numbers at work in 2010 will fall 5.5% to 1.86m and will hold at that level in 2011, it said.

For 2011 its growth forecast is more optimistic with GDP of 2.25% predicted for the year.

It says the slender recovery is on thin ground warning financial and fiscal contractions in EU economies could lead to a “double dip recession.”

It said the crystallisation of the government’s banking losses at €25bn and the continuing difficulties with sovereign debt markets across Europe the short-term prospects for the Irish economy continue to be precarious.”

Fine Gael Finance spokesman Michael Noonan has called on the Government to make job creation and protection “an absolute priority” after the ESRI warned of large-scale emigration and zero job market growth.

“The ESRI’s report should set alarm bells ringing at the highest levels of Government that its narrow and visionless economic strategy of massive bank bail-outs and fiscal austerity is not enough to get Ireland working again.

“This crisis is crying out for new thinking to create new jobs, to protect current jobs, and to retrain and up-skill the legion of unemployed”, he said.

The ESRI also warns the General Government Deficit could balloon out to 19.75% if the cost of the bail outs for Anglo Irish Bank and Irish Nationwide Building Society are included in the figures expected to reach €12.9bn for this year.