While Ireland’s economy is showing modest signs of recovery, the growth outlook remains challenging and the Government will need to retain a tight fiscal policy all the way out to 2020, one leading economist has warned.
In his 2013/14 economic outlook published yesterday Jim Power, chief economist at financial services firm, Friends First, said that GDP should grow by 0.3% this year, before jumping by over 2% next year; with the unemployment rate likely to decrease to 13.3% by the close of 2013 and to 12.5% by the end of next year.
His outlook for economic growth is largely in line with recent forecasts from the Department of Finance and the Central Bank.
However, he warned that things like the lack of credit going to SMEs; the remaining problems within the domestic banking system, including the possible need for further capital injections; high sovereign and personal debt levels and the state of the wider eurozone economy, all offer potential bumps in the road to recovery.
“It is clear that Ireland’s economy is returning to growth, but we cannot be complacent as a number of key challenges remain; and any one of these could immediately set back the recovery,” Mr Power stated.
“A deal on bank debt would represent a real game-changer, but will be very difficult to achieve in the current European political climate.” Government needs to keep fighting for such a deal, he added.
Mr Power said SME credit remains a major source of concern with half of the outstanding loans to the sector non-performing and there being little or no available credit to growth-orientated small firms — and a problem for the economy.
“If ‘Ireland Inc’ is going to get back on its feet, we need the SME sector to expand. Policymakers need to support this by creating a framework for accessing credit and by reducing the costs of doing business,” he remarked.
Meanwhile, appearing before the Joint Oireachtas Committee on Jobs and Enterprise, yesterday, representatives of Microfinance Ireland — the non-profit agency set up last year to provide loans of €2,000-€25,000 to micro-enterprises — said that demand, in its first 12 months, has been “significantly lower than originally anticipated”. It has approved €1.62m in lending and 45% of loan applications supporting 107 firms and 237 jobs.
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