€30bn taken out of economy - report

AROUND €30 billion a year has been taken out of the economy because consumers have stopped shopping, building has slumped and businesses are not investing, according to one expert.

Dr Ronnie O’Toole, chief economist at National Irish Bank (NIB), predicts in a report that domestic demand will fall by 13.6 per cent as consumers rein in spending and the construction downturn continues to take its toll on the wider economy.

Dr O’Toole says in the report, due to be published today, that gross national product, the total value of goods and services produced in the State, will fall by 7 per cent this year. The scale of the collapse can be seen in the fall of private sector demand, he says.

“In 2006, at the height of the boom, the Irish private sector was a net borrower to the tune of €10 billion,” he says. “In 2009 the private sector will be a net saver of €20 billion a year. This represents a withdrawal of €30 billion from the economy annually because of less spending on housing and consumer goods, and less capital investment by businesses.”

He warns against further tax increases, and says public sector costs need to be cut.