Will 2010 see the end of the recession? Economy still in hibernation, say the bears
Published 10/01/2010 | 05:00
THE co-founder of endeavour.biz, a website for entrepreneurs, and the founder and former chief executive of the stock photographs company, Stockbyte, didn't mince his words when asked if Ireland has seen the end of the recession.
"Anyone who thinks we're coming out of recession this year or that house prices are levelling off at any time in the near future has got to be smoking pot," says the tough-talking Kerryman. "The fear factor and tougher credit will drive house prices down much further. Those who survive in business will be under enormous pressure from banks who are now gouging massive margins to pay for their asinine behaviour."
Kennelly does not believe Ireland will emerge out of recession until Irish-owned companies "get their acts together and start creating and exporting world class products and services at a phenomenally greater scale than they are today".
"When we come out of recession, it does not necessarily mean that unemployment will be resolved," he adds. "Businesses get leaner and much more efficient during tough times and the lag may be substantial."
THE tourism industry had one of its most difficult years ever in 2009. Tourism revenue declined by almost 17 per cent last year to €5.2bn -- its lowest level since 2004. Shaun Quinn, chief executive of Failte Ireland, expects 2010 to be difficult as well.
Many tourism businesses in Ireland depend on overseas markets such as Britain and the US for custom. "The prospect of some of those large markets returning to growth is probably unlikely in 2010," says Quinn.
"We are hoping that as we get into the second part of this year, some tourism markets will grow. With Irish people less inclined to take foreign trips, there may be an upturn in the domestic market. Continental markets such as Germany have a greater prospect of returning to growth.
"So those with good tourism business built up in continental Europe will be more fortunate this year -- but those with major exposure to the US and British markets will be vulnerable."
With consumers trading down, other tourism businesses more likely to survive this year are those that offer discount deals to consumers -- as opposed to those operating in the high end of the industry, according to Quinn.
Despite the knockbacks of the last year, there is greater optimism among tourism businesses this year.
"This time last year, only 20 per cent of tourism businesses said that they expected the next year to be better than -- or even on a par with -- the last one," says Quinn.
"Today, two-thirds of tourism businesses expect that."
THERE is still "great uncertainty" about whether or not Ireland will come out of recession this year, warns Alan Gray, who is managing partner of Indecon Economic Consultants.
"Nobody knows with certainty the precise timing of the recovery but it is clear that the Irish economy is in a better position to build a recovery than it was six months ago, and the worst in terms of the collapse in confidence is over," says Gray.
Ireland's recovery towards the end of 2010 is "critically dependent on three factors", adds Gray. "Firstly, that there is a sustained recovery in external markets which would support a modest recovery in exports; secondly, that Ireland improves its cost competitiveness; and thirdly, that there is a return in confidence and access to finance for businesses."
Gray believes that domestic demand in Ireland will remain weak this year and that businesses dependent on such demand will find the first half of 2010 very challenging.
"The businesses which will be the first to recover are likely to be higher-skilled exporting services and manufacturing firms," says Gray.
"For businesses supplying domestic demand, essential services such as utilities and food will recover first -- but those businesses supplying high-end discretionary products or services will find difficulties remaining for some time.
"The positive news for Ireland is that the passing of the Lisbon Treaty and the successful first phase of the correction in the public finances has given international and Irish investors confidence in Ireland's ability to manage our way out of the recession."
THERE will be more job losses this year and 2010 is likely to mark "the low point" for the Irish economy, warns O'Brien, a senior editor at the Economist Intelligence Unit.
"Exports might be stronger than anticipated if the global upturn strengthens and consumer spending may get a fillip from the credibility-enhancing budget.
"Alas, however, the downside risks are greater in number and potential consequence. Some of the real dangers in the short term include further tremors in the financial system -- both at home and abroad -- the higher than anticipated costs of stabilising the banking system, and the risk that the Government will not be able to borrow enough to cover its still-massive deficit."
O'Brien believes that house prices still have a long way to fall. "House prices will almost certainly continue to fall in 2010," he says. "Weak demand for housing, which is being exacerbated by net emigration and a very significant oversupply means that the bottom for the housing market is not even in sight yet."