Economy 'to contract by 2.3%' this year

Ireland is to endure a fourth successive year of recession this year, according to the latest forecast from economic consultants Ernst and Young.

In its latest Economic Eye assessment the firm is predicting a further contraction in the economy of 2.3% in 2011.

The report said Ireland now has a well established ‘two speed’ economy, with exports forecast to continue growing in response to the rise in global demand for Irish goods and services.

But the domestic economy will struggle in the face of public spending cuts, weakness in the construction sector and pressures on consumer spending.

Employment will fall further over the next two years, according to the report, and by the end of 2012 more than 400,000 jobs will have been lost since the recession started.

The report claims that it will take 20 years for jobs to return to the levels they were at in 2008, but on the upside Ireland is one of the few countries exporting more now than before the recession, and that will help the economy to grow modestly next year.