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Central Bank forecasts jobless recovery

Friday, July 30 11:14:01

While Ireland's GDP will grow modestly this year - by about 0.8pc - it will take another year before unemployment figures start to decline, the latest Central Bank quarterly bulletin said today.

Gross National Product (GNP) - which measure the domestic economy without the input from multinationals operating here - is, however, likely to continue to decline this year, albeit at a relatively modest pace of about 1 per cent, compared to a decline of 10.7 per cent in 2009, the report said.

Recently released Quarterly National Accounts data point to a somewhat stronger than expected rebound in GDP and confirm the predominant contribution from exports to the recovery in aggregate demand. Domestic demand, however, continued to contract, it said.

Looking at next year, with the adjustment in domestic demand expected to have run its course and assuming further momentum in the recovery in external demand, GDP growth is forecast to increase to about 2.8 per cent with GNP increasing at a rate of about 2.2 per cent, the Central Bank forecast.

On average, employment declined by 8.1 per cent last year and is likely to decline further, by about 3.9 per cent this year. Some stability should return to the labour market next year reflecting a more reasonable balance between external and domestic sources of growth.

However, while likely to be on an upward trend by the end of the year, employment on average is likely to decline slightly by about 0.3 per cent next year.

A decline in labour supply has mitigated the impact of lower employment in the rate of unemployment, which is nevertheless expected to increase to an average of 13.5 per cent this year before declining slightly to about 13.3 per cent in 2011, the report said.

Annual inflation is set to turn positive during the final quarter of this year but core inflationary pressures are likely to remain subdued into next year, as labour market weakness persists, it predicts.