Jobless rate of 12% forecast for 2015

The unemployment rate will drop to 12% in the next two years, one of the most bullish economic forecasters has predicted.

In its latest quarterly economic outlook, Merrion Capital said yesterday that the average unemployment rate should drop to 13.9% by the end of this year — down from 14.7% at the end of 2012 — before reducing to 13% next year and 12% by the end of 2015. In its previous quarterly bulletin, Merrion said the unemployment rate would still be around 13.5% at the end of 2014.

As well as tentatively improving its jobs market outlook, Merrion remains one of the most bullish forecasters on the Irish economy, as a whole.

Yesterday’s outlook retains its forecast for 1.6% GDP growth for 2013 and 2.8% growth next year.

“There are some reasons to be cautiously optimistic about Ireland this year. Not only has the country taken well-publicised steps to regain lost competitiveness, but the domestic economy, including the property market, particularly in Dublin, has shown signs of revival,” said Merrion’s chief economist, Alan McQuaid.

“However, he added, “as a very open economy, Ireland remains vulnerable to continued weakness in its key export markets — not least the UK — as well as possible re-escalation of eurozone debt market turmoil following the recent events in Cyprus.”

While technically unchanged, Merrion’s GDP forecasts are significant in that the Central Bank and Bank of Ireland both recently downgraded their 2013 expectations (the latter by 0.5% to 1%), while the Department of Finance is due to update on its turn-of-the-year forecast of 1.5% GDP growth for 2013, when it publishes its stability programme update at the end of this month.

Although most headline forecasts are for GDP growth of between 1% and 1.5% (both the IMF and the European Commission see the economy growing by 1.1% this year and 2.2% in 2014) only employers’ representative Ibec is currently more optimistic than Merrion, with a 1.8% outlook for the current year.

While Mr McQuaid sees Ireland successfully exiting its bailout programme on schedule, at the end of this year, the rejection of the new public sector pay deal could pose a problem, he said.

“While overseas investors have been impressed by Ireland’s ability to avoid street protests and strikes, helping it return to capital markets last year, that could quickly change if industrial peace is not maintained. Irish bond yields are unlikely to rise as a result of the rejection of the deal, but could increase sharply if unions up the ante and start taking to the streets,” he added.