Ernst & Young pessimistic over recovery

ERNST & YOUNG has modestly downgraded its GDP forecast for this year, but has significantly downgraded its outlook for 2013 and 2014, as it predicts that Ireland’s economic recovery will take longer than expected.

The accountancy and advisory firm predicted in November that Ireland’s economy would grow by 3.1 per cent in 2013 and 3.4 per cent in 2014.

It has now downgraded that forecast to 0.6 per cent and 1.4 per cent respectively.

Neil Gibson, an economic adviser to Ernst & Young, said the downgrade was due to the continuing impact of the “ongoing problems of the euro zone” coupled with weak domestic demand.

He noted that the State’s economic growth potential was dependent, on the most part, on factors “outside its control”.

He said that Ireland’s economic prospects were positive in the long-term.

“A strong export performance is forecast to re-establish the Republic of Ireland as one of Europe’s faster-growing economies in the longer-term,” Mr Gibson added, “with overall growth averaging 4.3 per cent between 2015 and 2020.”

However, the all-island report identifies unemployment as one of the key long-term threats facing the economy.

It estimates that the Republic will need to see a net increase in employment of 320,000 over the next decade in order to reach a “desirable rate” – almost double the rate that is forecast.

Ernst & Young predicts that unemployment rates will rise to 14.9 per cent in 2012 and 15.2 per cent in 2013.

Mr Gibson said that while Ireland’s unemployment rate appeared to compare favourably with those of countries such as Spain, the Irish unemployment figures did not take into account the number of working-age people who emigrated.