THE Irish economy will experience the worst slump of any industrialised economy since the 1930s with one in six workers facing unemployment by the end of next year, according to the latest forecast from the Government’s economic think-tank.
The latest Economic and Social Research Institute (ESRI) forecast comes as figures show the wealth of every Irish household has plunged by more than €150,000 over the last two years.
The ESRI report predicted the economy will contract by a total of 11.6% over the three years from 2008 to 2010.
Economic growth fell by 2.2% last year and will, according to the ESRI, plummet by a further 8.3% this year.
The institute also suggests that the fall in growth will ease back in 2010 with a decline of just over 1%.
The report predicts that unemployment will reach 292,0000 in the current year, giving an average unemployment rate of 13.2% and an increase of 114% on last year.
By the end of 2010 that average unemployment rate is set to hit close to 17%, or 366,000, reaching levels not seen since 1988.
“By historic and international standards, this is truly a dramatic development,” said Alan Barrett, the senior author of the ESRI report.
The ESRI is also forecasting the general government deficit will be 12% and not the 10.75% as set out in the latest budget.
Figures released by National Irish Bank also show that at the end of last year, average Irish household wealth was €539,000, compared with €646,000 at the end of 2007 and €693,000 at the peak of the housing market in 2006.
The 20%, or €150 billion, drop in wealth over the last two years has resulted in a massive drop in spending on luxury items, with Porsche and Lexus car sales falling by 90% and 80% respectively in the past year.
More worrying, the National Irish Bank report reveals a sharp reduction in donations to charities and suggests consumers are saving 10% of their disposable income compared with just 3% in 2007.
The bank’s report also revealed that shoppers are switching to cheaper grocery products and in particular ‘own-brand’ goods, which are, on average, a third cheaper than branded products.
Four-out-of-five shoppers said they now buy ‘own-brand’ goods.
Reacting to the reports, Friends First chief economist Jim Power, said Ireland could face the intervention of the International Monetary Fund (IMF) unless real political leadership is shown.
Mr Power said part of him would “actually welcome IMF intervention” as it would have no political allegiance and would have no attachment to any sector of the economy.
“They just come in and they slash and burn and if that’s the only way to get the public finances back in order then so be it.
“But I’d hate to have to test the theory,” Mr Power said.
It has also emerged that Ireland is to ask leading international figures with links to the country to attend a forum to discuss ways to rescue the ailing economy.
The Global Irish Economic Forum will be part of a “deeper government engagement” with the Irish diaspora, Foreign Affairs Minister Micheál Martin said.
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