NCB draws gloomy economic picture

The economy has been struck a massive body-blow which will deliver it into a recession this year, it was warned today.

The latest prediction by a stockbroking firm is even gloomier than the Central Bank’s already downbeat forecast.

NCB stockbrokers said the economy has been hit by one large internal shock - the housing slump – as well as lots of external shocks.

These include the credit crunch, the global downturn, rising prices and currency changes. The result is an extremely weak economy which will continue to slow this year into an eventual recession, it claimed.

House prices will also continue to slide a further 10% to 15%, according to the stockbrokers. The Central Bank was slightly less bleak – but far from positive – in its latest quarterly bulletin.

It warned prices will continue to soar this year, people will spend less and this will have a further knock-on effect on unemployment. Rising energy and other costs across the world will push up the price of everyday goods and services in Ireland, it said.

This inflation has already seen a marked turnabout from the shopping splurges of recent years with the downward trend set to continue.

As nervous consumers pull in the purse strings, less jobs will be created throughout the year while there could be no new jobs whatsoever next year, it predicts, but the Bank said the economy would continue to grow very slightly this year and next.

Breda O’Sullivan, NCB economist, said from here on in people will start to feel the impact of the looming recession.

“It’s going to be tough for the next year for everybody,” she said.

“We think the economy is actually going to shrink this year before flattening out next year. What this really means for ordinary people is that they will have less money in their pocket, as they deal with rising prices.

“And with unemployment going up people won’t be able to move from job to job so easily.”

Ms O’Sullivan insisted the underlying foundations of the economy were sound and that Ireland was well placed to pick up again when the world economy is back on track.

In the meantime, it is at the mercy of the credit crunch, the global downturn, rising prices and currency changes.

The result is an extremely weak economy which will continue to slow this year into an eventual recession, said NCB.