‘We must be ready to renegotiate bailout deal’
“If an opportunity opens itself to getting a deal on a more favourable rate or a more favourable timeframe (on the bailout) then you should be primed and ready to do that,” said Neil Gibson, author of the report in which he predicts the economy will fall 2.3% this year, resulting in a fourth year of recession.
This is more pessimistic than most other forecasts which anticipate modest growth, but Gibson said the report’s core message is that from 2012 on the economy will start to recover and grow by 1.1% next year.
Exports will top that improvement, he said.
He disagreed with Transport Minister Leo Varadkar’s view that we will be forced to seek another bailout.
“If our models are right you will be on the road to recovery in 2012 and you should be able to avoid that,” he said.
Ireland is “extremely fortunate” it doesn’t have to go to the market this year like Greece, he said.
“Whatever your views of the bailout might be it has certainly bought time,” he said. And while 5.8% interest may seem high, set against the current bond rate of 13% it looks reasonable.
His economic forecast is based on the view that consumer spending will fall 7% in total over the next two years, with a decline of over 4% on the cards in 2011.
Lack of consumer confidence on top of falling Government spending and weaker capital investment will keep the economy depressed again in 2011, he said.
Though the outlook from next year looks positive the time needed to get back to full employment could be 20 years, he said.
Over the next two years house completions will be less than 20,000, while it will be 2015 before demand for new houses gets back to 1980s levels, while house prices from peak to trough will have fallen 30% against 5-10% in Britain.
