Central Bank chief predicts no recovery until 2011
Tuesday July 14 2009
John Hurley, governor of the Central Bank, has warned that Ireland is unlikely to experience the effects of a potential economic recovery until 2011 at the earliest.
He made the comments as he launched his final annual report as head of the bank today.
He also said the European Central Bank should keep interest rates at a record low as long as needed for a sustainable economic recovery to set in.
"Policy must continue to provide support to the real economy for as long as is necessary. Rates should only be increased once there are clear signs that a sustainable recovery has begun.”
The ECB has cut its key interest rate to a record low of 1 percent, offered to lend banks as much cash as they want and started purchasing €60bn of covered bonds to stem the worst recession since World War II. While some recent data indicate the economy may have passed the worst of the slump, “downside risks to the global outlook remain,” Hurley said.
Hurley also said that Ireland’s economy will probably shrink 8.3 percent this year and 3 percent in 2010 before a “gradual recovery” materializes in 2011. The bank forecasts Irish unemployment will rise to 15 percent in 2010 and Hurley said the country’s widening budget deficit is “cause for serious concern.”
The Central Bank chief, who is retiring later this year, said the government’s so-called bad bank, known as the National Asset Management Agency, will help to “renew confidence’” in Ireland’s lenders by removing “problem assets” related to the real estate sector.
“The pricing of these assets is a key issue which must balance restoring the role of the banking sector in the real economy with value for the taxpayer,” he said.
(Bloomberg)
