IRELAND’s depleted construction sector is unlikely to see any kind of recovery until the second half of next year, at the earliest, according to one prominent economist, but the fall in the overall economy shouldn’t be as pronounced as previously anticipated.
In his latest quarterly economic outlook report, Alan McQuaid – chief economist with Bloxham Stockbrokers – said that house completion levels are likely to fall by nearly 60% this year while house prices will probably decline by another 10%-15%.
“It is difficult to call the timing of the next recovery phase in the building sector, but a key prerequisite condition will be evidence that house prices have bottomed out.
“If we accept the view that house prices have further to fall, then that recovery is unlikely until the second half of 2010 at the earliest. However, when the market recovers there will be a need to build up our stock levels as Ireland is well behind the rest of western Europe in terms of its housing stock,” he said.
Elsewhere in the commentary, Mr McQuaid said that Ireland’s unemployment rate should come in at around 13.2% for this year, as a whole. A recent poll of Irish economists, on this matter, carried out by Reuters came to a projection of 13.9% – a figure which is “way too pessimistic”, according to Mr McQuaid.
“Based on recent improving trends and a recovery in the global economy, we now see the jobless rate peaking at 15% – or just below – in 2010,” he added.
On an overall judgement on the country’s economy, Mr McQuaid said he is becoming continually less pessimistic. “A lot will depend on whether the global economic recovery can be sustained once stimulus measures are removed. We’re now looking for a contraction in GDP of 7.8% in real terms this year and a fall in national output of 2% in 2010 as against our previous forecasts of -8.5% and -2.3%, respectively,” he said.
He added that Ireland’s well-performing export sector will remain a vital growth contributor to the local economy.
“Ireland’s services export side is a big part of our economy and will play a key role in the country’s eventual economic recovery over the next few years. No other western economy has as large a proportion of its exports in the services sector.”
Bloxham is also sticking to its 7.5% fall forecast for consumer spending for 2009 and reckons that the Government will not meet its 2009 budget deficit target – as outlined in the April supplementary Budget – of €20.35bn.
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