THE economy is facing its third decade of “self-inflicted harm” since the 1980s because of itsfailure to control the nationalfinances, a top international economist has warned.
As a result of the current mess, the danger of the State defaulting on its debt repayments cannot be ruled out, warned Dan O’Brien, chief economist at the Economist Intelligence Unit.
Mr O’Brien pulled no punches in his presentation to the Construction Industry Federation’s breakfast briefing in Dublin.
With the economy due to decline by over 10% during this period of turmoil, Ireland “is technically in a depression”, he said.
His theme was: “Ireland’s economy: where we are, how we got here, and where we’re going”.
He said the economy was in deep trouble and questioned whether the Government should proceed with its major spending on infrastructure under the National Development Plan.
Projection of a return to 50,000 houses a year being built was off the mark, he said.
We have more houses than we require due to the “mania” that gripped the country over the past decade, he said.
A housing requirement of between “22,000 and 25,000” was likely to be the actual demand for some time to come, he said.
Mr O’Brien said damage to the economy has been “self-inflicted” and it was quite extraordinary that both the Government and its public servants failed to realise yet again that the tax windfalls from the property boom would dry up eventually.
In that context a recent survey ranked Ireland the worst of 18 countries when it came to dealing with its national finances, he said.
The slump in the economy should give us some positive advantages, he said.
It will reduce wages and lower property prices, making Ireland more attractive as a location for foreign direct investment.
Another positive has been the emergence of the services sector as a powerful component of Irish exports, reflecting the impact of FDI companies with a strong IT dimension, he said.
The “biggest risk” on the FDI front is that if Ireland starts “being considered as a problem country”.
O’Brien said the number of negative stories emerging about us could damage our hard-won and justified reputation as a good country in which to do business, he said.
If that goes, potential investors could put Ireland into the “no, no” category as a potential location, he warned.
We have suffered from “self-inflicted lost decades”.
During questions from the floor he said the Government could do little to inject some life into the economy. The reason being: “There’s simply no gas left in the tank”, he said.
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