24 June 2008

ESRI declares: We are in Recession

The Economic and Social Research Institute (ESRI) in Dublin has declared that Ireland is "in the grip of an economic recession for the first time since 1983".

Economists are warning that government borrowing will exceed EU limits next year if public spending growth is not curtailed to historically low levels. The massive public finance surplus, on which the government has based its election promises in 2007, will be all gone by next year.

In its latest Quarterly Commentary ESRI forecasts that unemployment in Ireland will exceed 7% of the labour force by the end of this year and that public finances will deteriorate sharply.

The authors of the report say that this raises the prospect of a return to net emigration for the first time since the 1980s, with the numbers having to leave the country to find work exceeding those coming here by about 20,000 per year.

The report includes the ESRI's fifth successive downward revision to its outlook for this year. It says the impact of declining consumption, slower exports, the building slump, and the massive international credit crisis have been much worse than feared.

ESRI expects that economic activity will now fall by 0.4% and disposable income by 2.6% this year, the first annual reductions since 1983. The implications are stark.

But speaking on RTÉ Radio's Morning Ireland programme, report co-author Dr. Alan Barrett said that the prospects of getting out of this recession are better than those of the 1980s.

The ESRI argues that the government should break European rules and borrow € 11 billion to run the country next year. It says pay restraint must be imposed in the public sector, and it calls for state agencies to do more to help the unemployed.

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