The Nevin Economic Research Institute forecasts that the economy will grow by 0.5% this year and 1.1% next year, with unemployment dropping to 10.4% by 2016, according to its latest Quarterly Economic Observer.
“In the Republic, we anticipate small but positive economic growth in 2014, although concerns remain regarding the impact of contractionary fiscal measures in Budget 2014, a weakening outlook for our export markets, continuing high long-term unemployment, the continuing overhang of personal debt and the impact of changes in the pharmaceutical sector,” the institute said in the report.
In its last assessment, the Irish Fiscal Advisory Council said if growth came in under 2% over 2014, the Government would have to raise the budgetary adjustment next October by more than the planned €2bn.
The Nevin Institute (Neri) attributed the sluggish growth rate over this year and next year to the patent cliff effect in the pharmaceutical sector. However, even without the problems in the pharma sector, the wider economy remains constrained because of the contractionary fiscal policies.
“As the impact of the pharma- sector’s contraction fades, we anticipate a return to higher growth levels of 1.8% in 2015 and 3% in 2016.”
Neri criticised the Government for the delay in investing the proceeds of the National Strategic Investment Fund.
While it anticipated some increases in investment in the economy, it argued that “there remains potential for this area of economic activity to increase further if Government and other agencies begin to make use of the recently established Ireland Strategic Investment Funds within the auspices of the National Pension Reserve Fund”.
Nevin Institute senior researcher Dr Micheál Collins said: “Over €6bn was allocated to this fund during mid-2013 and it remains a regret that these funds have not been leveraged to support an investment-led stimulus to the weak domestic economy.”
Roughly 20% of the workforce is now in low-paying jobs according to EU criteria. It found that there has been a “hollowing out” of middle-paying jobs.
The institute said: “There is a need to both retrain unemployed former construction workers and also prepare administrative workers in employment for future changes in the labour market.
“As a domestic-led recovery is unlikely, over the coming years it is probable that there will be a continued expansion of employment for the higher paid, stagnation or declines for those in middle-paying occupations, and the fate of the lower paid will depend on a trickle down from those in higher-paying jobs.”
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