Irish economy to slip back into recession this year
IRELAND will slip back into recession this year, as the eurozone crisis hits the export sales on which the Republic's economy depends for growth, a new report published by accountants Ernst & Young has said.
The E&Y all-island Summer Forecast also reduced forecasts for next year and 2014. It now expects output (GDP) to grow by an average of just 1pc a year. This compares with the 2.2pc forecasts in this month's report from the IMF.
With the danger of a prolonged slump, the report said policy should concentrate on creating jobs, even if this means more pay cuts and shorter hours for those already in work, in both public and private sectors.
Neil Gibson, economic adviser to Ernst & Young, said the forecasts had been reduced mainly because there was no obvious solution to the eurozone crisis in sight.
He had already been gloomy about 2012, but now sees GDP falling slightly, after a 0.7pc increase last year.
National income (GNP), which excludes foreign company production, will shrink by almost 1pc -- although this is an improvement on last year's 2.7pc drop.
"The changes are minor, although they would mean a technical recession," Mr Gibson said. "But there will be an awful lot of summits and crisis meetings between now and 2014. It is almost a foolish question to ask what the situation will be in 2014."
Even if growth does fall below forecast, Mr Gibson does not expect the troika to look for more cuts to achieve the targets.
"They will never say so openly, but I think they will take the view that, if Ireland has carried out the measures in the bailout programme, that will be sufficient."
He said growth of less than 2pc would not create jobs in sufficient numbers, in either the Republic or Northern Ireland.
More than 400,000 jobs -- almost double official targets -- will have to be created on the island to achieve a 70pc employment rate by 2022, the report said.
"Governments need to try to do that while pursuing fiscal balance. They have got to favour recruitment and reduced labour costs over redundancies and smaller headcounts and incentivise private employers to do the same.
"The world has moved on since the Croke Park deal was signed. We now have a much clearer understanding of what we face. How many other policies are the same as they were three years ago?" Mr Gibson said.