Ireland’s economy will plunge into recession this year for the first time in 25 years as it suffers from downturns to the consumer and construction industries, a leading economic think tank said yesterday.
The Economic and Social Research Institute (ESRI) slashed its estimate for Irish gross domestic product (GDP) growth to minus 0.4 percent this year, down from its last forecast of 1.8 percent.
In its quarterly commentary the ESRI said it also expected gross national product (GNP) — the government’s preferred measure of economic growth — to drop to minus 0.4 percent from its forecast of 1.6 percent made three months ago.
The institute said the last time Ireland had experienced negative GDP was in 1983 and the last time there had been negative GNP was in 1986. GNP is regarded by the government as a more accurate barometer of the country’s economic performance as it strips out substantial profits earned by multinational companies in Ireland, which are then taken out of the country.
The ESRI said the forecasts for this year “represents another in a series of downward revisions” for the year.
“In earlier commentaries, our downward revisions were related to an acceleration in the construction downturn,” it said. “This time, it is our revised forecast for consumption that contributes most to the overall revision. We now expect consumption to grow by just 1.0 percent in 2008.”
“This is a dramatic slowdown from the last three years when consumption growth has averaged over 6 percent,” it said.
The commentary expects a modest upturn next year, with GDP growing at 1.9 percent and GNP by 2.0 percent.
A spokesman for the institute describes it as one of their “gloomiest” ever forecasts and the commentary says “a number of stark implications” arise from the predictions.
“We expect the general government deficit could be 2.8 percent of GDP in 2008 and 3.9 percent of GDP in 2009,” it said. “Hence, we expect that the three percent deficit limit under the Stability and Growth Pact will be breached in 2009.”
“On average across the year, the number employed in 2009 will be lower than the corresponding number in 2007,” it said. “We expect net outward migration to resume in 2009, at a rate of 20,000.”
One of the main expressions of Ireland’s extraordinary conversion from a poor agrarian economy to a dynamic and high-tech power house is a massive rise in property prices.
Ireland is known for its so-called Celtic Tiger economy, which refers to a period of double-digit growth during the 1990s, which placed the eurozone-member among the richest nations in Europe.
Major US companies with bases in Ireland include hi-tech giants Apple, Dell, Google and Microsoft.
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