Irish economy facing record downturn: think-tank

Tuesday, April 28, 2009 at 9:32 PM Posted by Beijing News


Ireland's economic downturn in 2008-2010 could be the worst for any industrialised country since the 1930s, the country's top think-tank said.

The Economic and Social Research Institute ESRI predicted Irish gross domestic product GDP will shrink by 11.6 percent in 2008-2010 after slashing its annual forecasts in a quarterly commentary.

The think-tank predicted the fall in gross national product GNP will be even worse, with a contraction of about 14 percent over the three-year period.

"By historic and international standards, this is a truly dramatic development," ESRI said in a statement.

"Prior to this the largest decline for an industrialised country since the 1930s had been in Finland, where real GDP declined by 11 percent between 1990 and 1993."

Ireland sank into recession in the first half of 2008, becoming the first eurozone nation to do so, as it was battered by the international financial crisis, a domestic property market slump and soaring unemployment.

GNP is regarded by the government as a more accurate barometer of the country's economic performance as it strips out substantial profits earned by multi-national companies in Ireland which are taken out of the country.

Meanwhile, ESRI cut its forecast for Irish GDP growth this year to minus 8.3 percent, which compared with a previous prediction of minus 3.9 percent.

It expects a moderation in the pace of decline in 2010 with GDP contracting 1.1 percent.

ESRI also predicted that Irish GNP would shrink by 9.2 percent this year, which compared with the prior forecast of a 4.6-percent contraction.

The "wave of poor outcomes and indicators in recent months has led us to cut our forecast for 2009," it said in the commentary.

"For 2010, we expect to see a moderation in the pace of decline and for GNP to fall by 1.2 percent," ESRI added.

Irish Prime Minister Brian Cowen's government has brought in a series of emergency budgets and fiscal belt-tightening packages as it struggles with a collapse in consumer spending, a ballooning deficit and surging unemployment.

The ESRI expects the jobless crisis to get a lot worse with the unemployment rate rocketing to an average 13.2 percent this year and 16.8 percent in 2010.

In an emergency budget earlier this month, the Irish government forecast the public sector deficit would be 10.75 percent of GDP this year and in 2010 and was on track to adhere to eurozone rules on deficits of 3.0 percent by 2013.

ESRI expects the initial targets to be missed and that the deficit will be 12 percent this year and 11.5 percent in 2010.

The think-tank added Wednesday that tax increases and spending cuts by the government in February and in the emergency budget were "broadly positive".

"While a comprehensive assessment of NAMA is not possible at this point due to the lack of full details, the movement towards decisive action on the banking situation is a positive development," ESRI said.



03 Contemporary Art by the Sea exhibition in Belgium. REUTERS/Thierry Roge

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