Friends First quarterly report predicts 1.4% growth for 2012

A study published today has predicted that the Irish economy will grow 1.4% next year, but house prices are likely to fall by 8% and unemployment to average 14.1%.

The pre-Budget Quarterly Economic Outlook from Friends First said "belt tightening and further cutbacks are the dual realities facing virtually every Irish citizen for the best part of a decade".

However the report's author Jim Power said Ireland has made progress and the Government must remain resolute and continue on its current fiscal path.

“Very skilful and innovative thinking will be required to pull the economy out of its current morass," the economist said.

"The quality of the labour force and the ability to attract and retain highly skilled workers will be a key determinant of Ireland’s success or failure.

"However external global factors which we cannot control will also dictate the pace of Ireland’s recovery,” he warned.

The economist is calling for a contingency plan to be put in place in the event of the euro system falling apart - with one option being a re-establishment of the sterling link.

Mr Power said Ireland needs to make sure it is in as strong a place as possible, in the event of the 'unthinkable' happening.

“Ireland will not influence the solution to the European crisis, so in the meantime we should keep the head down and proceed with haste to get our public finances out of their unsustainable position," Mr Power said.

However, he added, the real impediment to recovery is the Irish consumer – without domestic demand, a more broadly based recovery is unlikely.

“Consumers remain very concerned about future employment prospects, downward pressures on earnings, mortgage and other personal debt difficulties and the ongoing fiscal adjustment.

"This fragile confidence has been seriously eroded by the eurozone crisis."