Figures show economy grew last year for first time since 2007

Ireland’s economy will have grown throughout last year for the first time since 2007, economists have said.

However, two forecasts have predicted the economy will struggle to record significant growth over the remainder of 2012 with consumer spending continuing to fall.

The Economic and Social Research Institute (ESRI) think tank said in its quarterly forecast that the economy will have grown by 0.9% last year.

This is less than half of what was originally predicted (2.2%) but it will be the first time the economy has grown on an annual basis for three years.

Official figures are expected next month.

However, both the European Commission and the ESRI yesterday presented a relatively bleak outlook for the economy with little hope of any strong growth emerging before 2014, at the earliest.

Domestic demand, seen as essential to growth, will continue to fall for the fifth year in a row and is not expected to return any time soon, according to the European Commission’s forecast for the remainder of 2012.

Hard-pressed households, many suffering from joblessness or high mortgages, are continuing to pay off debts, starving the real economy of money.

Unemployment and immigration will increase as the State and the banking sector lay people off. Export growth, on which the Irish recovery has been based, is forecast to slow down.

Inflation, that began to rise again last year, will continue to do so because of the increase in VAT and sterling’s depreciation. At 1.6%, it will be lower than the euro area average of 2.1%.

The only optimistic note in the forecast is that continuing low interest rates could make householders’ lives easier.

Ireland is one of a few countries in the eurozone not in recession, and while the growth forecast of 0.5% is better than the -0.3% forecast for the rest of the euro area, it falls well short of what is needed to cope with the massive overhang of the country’s debt.

The European Commission’s outlook for the Irish economy is largely mirrored in the latest quarterly economic commentary by the ESRI, which predicts that Ireland will record modest growth of just 0.9% for 2012 — the same estimated result for last year.

ESRI economist David Duffy said its forecast was based on the uncertainty affecting the outlook for the entire eurozone which was slipping into recession as a result of austerity measures.

However, it predicts the external environment, while remaining weak, will improve in 2013 which should see growth rise to 2.3%. However, consumer spending will remain depressed and is likely to fall by 1.8% this year and a further 1% in 2013. Inflation is predicted to fall by 1.6% this year.

The ESRI claimed a key factor in the outturn for the economy would be the reaction of the private sector to such uncertainty.

It estimated that the unemployment rate will stabilise at 14% this year falling to 13.7% in 2013 due to a combination of continuing net emigration and a reduced participation rate in the labour force.

The ESRI said the Government had very few options to stimulate growth amid austerity measures.

However, it recommended continuing reform of the social welfare system and pay levels in sectors regulated by Joint Labour Committees.