Ireland will never return to the boom days of the height of the Celtic Tiger, according to Irish government economic think-tank, the Economic Social and Research Institute (ERSI).
Even with a world recovery in 2011, the Republic will suffer a permanent 10% drop in its economic output.
There will be continued higher emigration and lower employment into the future and the economy will only return to 2007 levels in about 2015.
If the world recession continues for one more year than forecast, the permanent loss in Ireland’s economic output would be closer to 15%, while unemployment and emigration will be even higher, according to the ERSI’s latest publication, Recovery Scenarios for Ireland. The report will today warn that Ireland’s hopes of a recovery by 2015 are heavily dependant on a global turnaround.
And even if that comes, the recession will have left a “permanent scar” on the economy in the shape of a 10% drop in economic output.
ESRI economist John FitzGerald warned Ireland’s recovery is also dependant on Dublin sticking to a policy of higher taxes and |reduced spending.
If that happens and if the global economy recovers in two years, then the best Ireland can expect is that economic output will be back at 2007 levels in 2015.
And Mr Fitzgerald warned the top priority for the Irish government right now must be unemployment, specifically creating an environment under which job creation can resume.
Tackling unemployment means removing the “structural deficit” in the economy — in other words bringing spending in line with tax receipts. Even during the boom years this “structural deficit” was evident and must now be eliminated. Unfortunately doing so means a return to permanently higher taxes and permanently lower Government spending.
The danger already exists that if the global recovery does not materialise by 2011, then our own economic recovery will be slower, the ESRI forecasts.
As long as the world economy recovers by 2011, and the Irish economy regains its competitiveness, then growth can resume to an average 5% a year up to 2015.
If this happens, unemployment would be cut from a peak of 17% in 2010 to between 6% and 7% by the middle of the next decade.
Priority should be given to tackling the skills deficit of those who have lost their jobs, the report concludes.