IRELAND’s slump-ravaged economy will finally emerge from recession next year, but “fragile” growth risks being battered by interest-rate rises, a key think-tank last night warned.
Unemployment will continue to climb through 2010, but the steep surges of the past 18 months are now behind us, the Economic and Social Research Institute (ESRI) said.
The relatively optimistic ESRI forecast coincided with warnings from opposition parties of a looming mortgage crisis as new figures showed the number of families in more than three months’ arrears doubled to 26,000 by last September.
More than €4.8bn was owed on defaulting home loans, with the rate of home repossessions increasing dramatically to one a day between June and September.
The outlook seemed bleak for struggling families as the ESRI forecast some Irish banks would hike-up interest rates in 2010 even before expected rises by the European Central Bank in response to stronger-than- expected growth in France and Germany.
ESRI experts warned this posed the biggest danger to Ireland’s emergence from recession, and came as bigger- than-expected falls in private-sector incomes (3.1%) were revealed in the year to July by the Central Statistics Office, which also found public sector incomes had risen by 1.3%, once the pension levy was deducted.
The ESRI estimated the economy crashed by 10% in 2009, and will contract by a further 1.5% in 2010, but modest growth will emerge in the second half of the year with the jobless total peaking at almost 14% – or 470,000.
This is lower than the 17% previously forecast, but the ESRI stressed that at least 40,000 people will have left to find work abroad in the year to next April – a five- fold increase in the number of people migrating.
In a surprise move, the ESRI claimed this month’s budget did not contract the economy as much as those in 1976 and the late 1980s had, as it praised Brian Lenihan’s actions.
But Fine Gael and Labour warned the Finance Minister’s lack of help for struggling mortgage payers was about to hit “crisis point” as a study by the Financial Regulator found more than 26,000 mortgages, or 3.3% of residential mortgages, were in arrears for 90 days or longer at the end of September, up from 14,000 mortgages in June 2008.
Labour spokesman on housing Ciarán Lynch insisted the number of defaulters losing their homes next year would soon spiral.
“I believe that the 331 repossessions are really just the tip of the iceberg, and when you consider that €4.8bn is owed on mortgage arrears, it would seem that the worst is yet to come,” he said.
In further bad news, a survey commissioned by the Department of Finance found five banks – AIB, Bank of Ireland, Anglo Irish Bank, National Irish Bank and Ulster Bank – were refusing 18% of loans requested by small and medium businesses, up from 14%.
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