Friday, September 21 10:40:23
Ireland's economy will shrink this year in terms of GNP as Ireland "bounces along the bottom" with unemployment remaining at around 14.8pc, according to the ESRI's latest quarterly economic commentary today.
It added that the Government should continue with its programme of Budgetary fiscal cuts whether we get a deal on bank debt from the ECB or not.
"We expect that GNP will fall marginally again this year, before increasing modestly in 2013. Unemployment will remain high at 14.8 per cent, declining only slightly next year and the balance of payments surplus is expected to continue to rise. The fiscal targets are likely to be comfortably met this year and next year, with the appropriate changes in taxes and expenditure, the targets should be met," the report said.
Using GDP, which is used to measure the fiscal targets set by the Troika, the picture is slightly more positive, with the ESRI predicting growth this year of 1.8pc, and 2.1pc next year, which is much higher than other official forecasts.
It points out that even if there was no national debt to service, there would still be a large budget deficit to close.
It says day-to-day spending outstrips tax revenues.
The weakness of the domestic economy means unemployment is set to remain high next year, and the ESRI has warned of the scale of the fiscal adjustment to come.
Speaking in RTE's Morning Ireland, ESRI research officer David Duffy said if confidence returned to the eurozone, the effect will filter through to exports leading to growth.
Mr Duffy said they are assuming that the emigration net outflow is in the order of 35,000 - 40,000 per annum over the course of the forecast.
Mr Duffy said there is a huge need to bring expenditure and revenue back into line.