Bloxham predicts 1% fall in GDP this year

THE IRISH economy is heading in the right direction, a new economic report says, with the decline in GDP set to ease to 1 per cent in 2010.

This compares to a 7 per cent fall in 2009, says the report from Bloxham stockbrokers.

The export sector will play a large role in the economy’s recovery, it says.

“The trade performance last year was quite impressive by international standards, but we cannot afford to rest on our laurels and assume everything will be OK as the US economic picture improves.

“Further significant cost-adjustments need to be made so that a leaner and meaner Irish export model can maximise the potential external trade gains for the country going forward. However, we are confident that this can be done.”

Prices and wages need to fall by a further 10 per cent to increase competitiveness, Bloxham says.

Irish homeowners are likely to be hit with interest rate rises during the year despite the fact that the European Central Bank is not expected to raise its interest rates until late 2010, or the first half of 2011.

The report also predicts house prices will continue to fall, shedding another 10-15 per cent in 2010.

Bloxham says the jobless rate will remain at about 7-8 per cent in the coming years due to a high level of unskilled workers in the economy. Unemployment is “close to peaking” in the 12.5 per cent to 13 per cent range.

“Although further job losses are likely in the first half of this year, particularly in the retail and financial services sectors, we don’t expect a major rise in the unemployment rate in 2010, and still believe we are close to a peak.”