The consultancy firm, EY, has downgraded its growth forecasts for the Irish economy on a weaker than expected global recovery.
However, there are signs that the labour market is recovering and stronger domestic demand will compensate for the drop-off in exports, it added.
The firm has lowered its Irish GDP growth forecasts from 0.8% to a contraction of -0.2% for this year on the basis of much weaker than expected growth over the first quarter of the year.
Over the next two years, growth forecasts have been trimmed from 2.2% to 1.6% and 2.6% to 1.9% respectively.
“We can finally report “green shoots” of recovery in the all-island domestic economy. Exports have done their best to prop up the island economy and have made a sizeable contribution to GDP. Ireland’s exit from the bailout programme is a further indication of how far the economy has come since the darkest days of the recession,” said Neil Gibson, economic advisory to EY Economic Eye.
“Ireland’s progress in implementing cuts and reform has been widely lauded and this only enhances an already strong international reputation.
“This welcome news does mean the economy has addressed all of the fallout from the economic crash, however it is an important staging post in a longer term trajectory that will be the focus of the medium-term economic strategy.”
Unemployment surged to crisis levels over the past few years. However, the jobless rate is set to stabilise at 13.7% this year before modestly improving to 12.9% next year and 11.9% in 2015.
Moreover, EY predicts that the high levels of net migration outflows will stabilise and decline gradually reaching zero by the end of this decade. The initial recovery in the jobs market was driven by an increase in part-time jobs.
However, this has now given way to an increase in full-time positions.
EY noted that for a more durable recovery in the jobs market, losses across the construction, retail, hospitality, transport and financial services sectors needed to be stemmed and reversed.
The report forecasts export growth of only 0.6% in 2013, before rising to 3.0% and 3.1% in 2014 and 2015, which it in part attributed to weaker-performing countries such as France and Spain.
“It is also partly a result of product-specific factors such as the ‘patent cliff’ which is a key factor behind a large drop in pharmaceutical exports, one of [the] Republic of Ireland’s largest export sectors,” it said.
© Irish Examiner Ltd. All rights reserved