Republic's economy at risk of stagnation
The Republic's economy will hardly grow at all next year and the country will fail to reach the European Commission's deficit target for 2014, Ernst -amp; Young forecast in a report yesterday.
The accountancy company's economic forecast revised next year's gross domestic product forecasts to just 1.1% - or less than half the 2.8% it predicted during the summer. The economy will stagnate as the government slashes spending, unemployment rises and more and more people leave the country, the report said. The report echoes warnings from the ESRI last month which said the European Commission's deficit targets would be hard to meet and attempts could damage the economy.
The report also predicts that unemployment in Northern Ireland will remain about 6% because of reliance on a shrinking public sector for employment. It forecasts a reduction in public administration employment in Northern Ireland of around 6,000 (-11%) between 2010 and 2015.
While the accountancy firm sees the Republic's economy emerging from recession next year, it predicts that the public will see little benefit as unemployment remains above 10% for the next eight years and emigration continues
"This downgrading is a reflection of the severity of the recession," said report author Neil Gibson. "The latest forecast highlights the extent to which the Irish domestic economy has suffered in the last 12 months."
The report sees fiscal deficit rising above 30% of GDP for 2010 to pay for the bailout of the banks.
Despite failing to meet the European Commission's demand that the deficit is cut to 3% by 2014, the report says the Irish government won't have to follow in Greece's footsteps and borrow from the European Union and International Monetary Fund.
Unemployment in the South will rise from present levels for the next two years, stay above the 10% level until 2018 and won't return to peak levels until 2024.
"House prices and overall economic growth will be severely impacted by the subsequent fall in overall demand, consumer confidence and government investment," Mr Gibson added.