Ireland is facing a period of low-growth and high unemployment over the next three years, according to the Nevin Economic Research Institute (NERI).
In its quarterly report published today, the Ictu-backed economic think-tank said the outlook for growth in GDP and employment appears “very uncertain and troubling.”
Assuming no major new external shocks, the Institute says Ireland’s recovery is likely to be slow and very limited.
It predicts low GDP growth of 1 per cent and 1.2 per cent over the next two years increasing to 2 per cent in 2015.
Unemployment will remain persistently high at 14.7 per cent this year and increasing to 15 per cent in 2014.
The debt/GDP ratio – a measure of the country’s ability to carry its national debt - is expected to peak in 2013. However, the report predicts the Government is likely to miss its target of a 3 per cent deficit by 2015 due to the combined impact of low growth and static employment.
It says continuing uncertainty in the Eurozone could negatively impact on export levels which it highlights as having been the “one bright spot” on the economic landscape. International indications, according to the Institute, show Ireland’s main trading partners continuing to stagnate or slip back into recession.
Output in the US showed zero growth in the last quarter of 2012, the UK economy contracted again (-0.3 per cent) while the pace of contraction in the euro zone accelerated to -0.6 per cent in the last quarter of 2012.
NERI senior economist, Dr Micheál Collins, said the depressed nature of the domestic economy combined with a weak international economic outlook, presents real challenges for Ireland achieving any form of sustainable economic recovery.
“Without growth, Government’s borrowing targets look ambitious and call into question the feasibility of the adjustment path currently being pursued," he said.
On a positive note, the Institute says the potential for the short-term improvements in Government finances to stabilise has improved due to a renegotiation of the promissory notes.
This should reduce the Government deficit by €1 billion per year from 2014 onwards. While the report says it is not clear what the Government’s plans are for the extra €1 billion it says if it were spent “wisely” – such as improving infrastructure - it could boost growth and long term prospects for debt sustainability.
The report also highlights the problem of youth unemployment in Northern Ireland, which it says has risen to dangerously high levels. Public money should be spent now to address the problem when the labour market is weakest rather than waiting until later when the situation would be expected to improve, it says.
A total of 24,000 young people aged 18-24 are unemployed - this is equivalent to 23.8 per cent of Northern Ireland's labour force in this age group. Around 34,000 or almost 20 per cent of 18-24 year olds are not in employment, education or training. The number of young persons between the ages of 18 and 24 claiming welfare benefit in January this year was over 18,000. It says a youth guarantee scheme would provide relevant training, work experience or paid employment for every young person unable to find work. Additional employment opportunities would be created for the person through on the job training or for society through community employment.
