Forecast that Ireland stays in recession next year

IRELAND WILL remain in recession in 2011 and unemployment will remain as high as 14 per cent in 2014, according to Ernst Young. The accountancy firm’s forecasts are significantly more grim than recent projections by the Department of Finance.

Ernst Young’s winter 2010 economic outlook describes the Government’s forecasts as “overly optimistic” and says it is likely that “further unpopular austerity measures” will be introduced in order to meet the targeted rate of deficit reduction.

The report says that if the banks can be fully recapitalised and budgetary targets met, “a leaner, more competitive Ireland should be in a position to return as one of the stronger euro zone economies”. However, this outcome “currently seems a long way off”.

Ernst Young expects Ireland will end 2010 with the worst economic performance in the euro zone, with a contraction of 1.5 per cent in gross domestic product (GDP). Greece, Spain and Ireland will be the only states in the euro zone not to have experienced some small level of economic rebound in 2010, it noted.

It expects a further 2.3 per cent decline in GDP next year. By contrast, the Government has forecast growth of 1.75 per cent in GDP for 2011 in its four-year plan.

While the Department of Finance said it expected Ireland’s unemployment rate, which is currently at 13.5 per cent, to have dropped to an average of 9.75 per cent by 2014, Ernst Young said the rate would remain as high as 14 per cent, with the numbers of jobless people increasing until 2013.

Ernst Young said Ireland would remain among the bottom three performers in Europe in terms of employment growth between now and 2013. The main drag on its economy would come from a fall in domestic demand.