Ernst & Young cuts forecast for growth in Ireland next year to 1.1pc
THE Irish economy will hardly grow at all next year and the country will fail to reach the European Commission's deficit target for 2014, Ernst & Young forecast yesterday.
The accountancy company's economic report revised next year's gross domestic product (GDP) forecasts to just 1.1pc -- less than half the 2.8pc it had predicted during the summer.
The economy will stagnate as the Government slashes spending, unemployment rises and more people leave the country, the report said.
It echoed a warning from the ESRI last month, which said the European Commission's deficit targets would be hard to meet and attempts to do so would damage the economy.
While the accountancy firm sees the economy emerging from recession next year, it predicts that the public will see little benefit in the next few years as unemployment remains above 10pc for the next eight years, emigration continues and house prices continue to fall.
The report sees the country's fiscal deficit rising above 30pc of GDP for 2010 to pay for the bailout of the banks. That is the worst fiscal position across the developed nations, including Greece.
Despite failing to meet the European Commission's demand that the deficit be cut to 3pc by 2014, the report says the Government won't have to follow in Greece's footsteps and borrow from the the European Union and the IMF.
Unemployment will rise from present levels for the next two years, stay above the 10pc level until 2018 and won't return to peak levels until 2024.
However, despite the gloom, the report forecasts that the Republic will "return to its position as one of the fastest-growing eurozone economies, as it climbs out of a very severe recession."
This forecast is based on the country's large export base, sectoral mix, strong skills base and low corporation tax.
"Despite the difficulties that still face the Irish economy in 2010, the outlook for a return to relatively strong rates of GDP growth in the medium term, well above the growth expectations for Greece and Portugal, is encouraging," said the report's author, Neil Gibson.