Euro slide and growth in exports to boost our economy
THE economy will expand this year as exports boom and those consumers not burdened by mortgages and debts begin buying again, Bloxham Stockbrokers predicted yesterday.
Gross domestic product would rise 0.5pc this year and 3.5pc next year after contra-cting 7.1pc last year, Bloxham economist Alan McQuaid said.
Gross national product, which many economists believe to be a better measure of Irish economic performance, is expected to contract 1pc this year and expand 2.2pc next year. It tumbled 11.3pc last year.
"We believe the recession has ended, and assuming the eurozone 'debt' issue doesn't turn into a full-blown crisis, then Ireland should be roaring back up the eurozone GDP-growth league table over the next 12 months, led in the main by a strong export performance," Mr McQuaid said.
The economist is revising forecasts upwards following better-than-expected retail sales figures this year and strong signs of export growth at Dublin Port, which saw exports jump almost a quarter in the first three months of 2010 compared to the same period in 2009.
Meanwhile, Aer Lingus shareholders were told last week that the airline's performance in April and May had continued to improve on the same months in 2009 while Zurich Insurance said it expected to create 120 jobs in Dublin.
The fall in the euro "is very encouraging for Irish exporters", Bloxham said.
Ireland benefits from euro weakness against the dollar and sterling because we trade less with eurozone members than any other member.
Bloxham sees the euro continuing to slide, further boosting export growth. House prices would fall a further 10pc, while the economy needed wages to fall by the same amount, Mr McQuaid said.
The biggest dangers to a recovery include the banks' possible failure to resume lending.
"It is important, therefore, that the banking sector gets back to 'normal' lending practices as soon as possible. If it doesn't then personal spending will eventually falter again, and the economy will hit a brick wall," Mr McQuaid warned.
Other dangers include the eurozone's debt crisis and a government failure to implement austerity measures. Possible solutions include the privatisation of some state assets or a change in European Commission rules to give all states more time to balance budgets.