Lower growth raises recession fears

Ireland is staring down the barrel of another recession after the country’s Central Bank more than halved forecasts for economic growth.

You cannot cut and tax your way out of a recession

Opposition politicians claimed a mini-budget was on the cards after the dramatic reassessment warned the economy would expand by just 0.5 per cent in 2012 rather than previous estimates of 1.8 per cent.

The Central Bank blamed a combination of falling demand from consumers at home and a poor export market.

The revised report on the economic outlook slashed the official predictions from October forecasting 1.8 per cent growth in 2012, and a 2.1 per cent prediction in the July bulletin last year.

Taoiseach Enda Kenny refused to accept the government’s more optimistic budget forecasts are out of line with the Central Bank and claimed the real priority is creating jobs.

“The government’s growth figures are median figures and we are prepared to stand by those,” Mr Kenny said.

“(It is) very difficult for anybody to determine what the final growth figure might be but the government have set out their figures and we stand by that.”

Jobs Minister Richard Bruton has been tasked with publishing in the next fortnight an action plan to ease the unemployment crisis.

The Central Bank also warned unemployment would hit 14.6 per cent, only eased by increasing emigration with 40,000 people expected to leave this year. The prediction for 2013 is 14.1 per cent if exports pick up.

Pearse Doherty, Sinn Fein finance spokesman, said Ireland was “without doubt” facing an­other recession.

“We have Enda Kenny time and time again saying we have brought the country back to growth. The Central Bank is telling us the domestic economy is going to shrink again next year,” he said.

“For people at home who aren’t interested in GNP or GDP, what does this mean? It means jobs are going to be lost, it means businesses are going to be struggling, it means more people are going to emigrate, it means more pressures on families.

“If this government continues on this path, they will introduce more cuts to bring them into line with a target that is getting more difficult day by day to reach.”

The Central Statistics Office reports showed the economy was last in recession in 2008 and 2009.

Mr Doherty said the startling reassessment by the Central Bank makes a mini-budget more likely.

Michael McGrath, Fianna Fail finance spokesman, said: “We are now looking at the fifth successive year of a contraction in the domestic economy.

“In opposition, Fine Gael and Labour consistently said you cannot cut and tax your way out of recession. In government, they now need to put those words into action.”

One of the most significant areas to be hit by the lack of growth will be the domestic economy, the bank said.

Gross national product, which excludes the value of the big employers in the multinational sector, will contract by 0.7 per cent, the report said.

Figures from the first bulletin of 2012 showed:

• The overall economy measured by GDP grew by 0.8 per cent last year; and will grow 0.5 per cent this year; and 2.1 per cent in 2013.

• Homegrown economy measured by GNP was down 0.6 per cent last year; and will go down 0.7 per cent this year; and by one per cent growth in 2013.

• Consumer spending was down by 2.9 per cent in 2011; and is forecast to fall 1.5 per cent this year; and rise 0.2 per cent in 2013.