Merrion economist urges easing of austerity amid zero growth forcast
MERRION stockbrokers has urged the Government to ease up on austerity as it forecast no growth in the economy this year.
Economist Alan McQuaid warned the lack of growth will have negative implications for Ireland's budgetary position, as Finance Minister Michael Noonan prepares for the country to exit the bailout at the end of the year.
Merrion said the Government will generate more growth over the coming years by easing back on austerity.
It claimed households and consumers remained nervous about economic prospects at home and abroad and that this was unlikely to change.
"An over-austere Budget in October runs the risk of dampening consumer confidence, which will feed through to the property market and in turn result in fewer jobs," Mr McQuaid said.
"It is clear that Europe's policy of endless austerity, aimed at getting high-debt countries' budgets back in balance as soon as possible, is not working, and the recent developments on the political front in Portugal suggest that even the politicians themselves in the Euroland 'periphery' are losing faith."
Merrion said it supported the call from business body Ibec for a more lenient approach to the Budget, particularly with taxes. In its pre-Budget submission, Ibec called for no new tax increases to help stimulate the economy.
Mr McQuaid forecast growth of 1.5pc next year. He said the country had enough cash to cover most of its funding needs next year, allowing it to leave the bailout at the end of the year.
Other key predictions include:
Consumer spending will shrink 0.5pc this year while Government spending will shrink 2pc.
Investment will decline 4pc.
Exports will slip 2pc while imports will suffer a 4pc slump.
Unemployment will be 13.7pc, falling to 13pc next year.
Mr McQuaid said Ireland was better placed than most to benefit from any global upturn, but at the moment was "likely to remain the case of an economy performing well below potential."
Merrion said it remained concerned that the property tax with high unemployment would have a negative impact on retail sales this year.
Mr McQuaid said inflation would not likely go above 1pc this year, as against 1.7pc last year and 2.6pc in 2011.