THE ECONOMY may have technically emerged from recession, but tough policy decisions will be needed to ensure the recovery maintains momentum, an economic survey suggested yesterday.

The Friends First quarterly economic outlook said growth should pick up gradually in the second of the year, but warned any emergence from recession would not be felt at a consumer level, and was being driven by the multinational sector.

“Unfortunately, this type of recovery will not result in any meaningful job creation or indeed tax revenue buoyancy,” said chief economist Jim Power.

Mr Power said it was essential that private sector businesses continue to manage costs and warned that the recovery could be derailed as a result of the ongoing sovereign debt crisis in Europe.

Mr Power said this highlighted the need to continue along the path of fiscal consolidation set out by the Government, adding that the process of budgetary consolidation would require the introduction of a property tax.

A necessary recovery in domestic demand would have to be driven by small and medium-sized businesses, although he acknowledged this would not happen for some time. “There are thousands of small companies that are hanging on by a thread. Conditions remain very tough and many companies are finding it impossible to access the credit necessary to keep businesses going.”

He added: “Ireland, both private and public sector, still has a lot of work to do to extricate itself from the current difficulties.”

He warned against complacency, despite indications that consumer sentiment is improving, and said a further decline in house prices was imminent as the property held by the National Asset Management Agency hit the market.

He said prices could fall a further 12 per cent this year.