THE NUMBER of people leaving Ireland this year and next is predicted to reach 120,000, according to the Economic and Social Research Institute.
The research body makes the prediction in its latest economic forecast, published this morning, which also concludes that the economy is recovering faster than it previously thought. The stronger momentum behind the recovery is reflected in the ESRI’s outlook for the jobs market in 2010, when the number of people out of work is now expected to average 285,700. This is 8,000 fewer than anticipated by the institute three months ago.
However, for 2011, it does not anticipate stronger economic growth feeding into demand for labour. The numbers of those jobless and in employment are expected to remain broadly unchanged on 2010.
The ESRI advocates shifting available resources away from spending on infrastructure towards aiding the unemployed to retrain and find new jobs. This approach would generate more employment creation, it believes. This year and next, the economy will perform better than anticipated just three months ago, according to the ESRI.
Having incorporated into its analysis economic indicators available since April, the institute now believes that gross domestic product (GDP) will expand marginally in 2010 before growing by 2.75 per cent in 2011.
Three months ago, it had expected GDP to shrink this year and grow by a slightly more modest rate of 2.5 per cent in 2011.
Despite its more upbeat view on the economy’s prospects, the institute warns in its Quarterly Economic Commentary that “the short-term prospects for the Irish economy continue to be precarious”.
It identified risks to the recovery coming from a possible lapse back into recession in major trading partners and renewed turmoil in the financial system domestically and internationally.
The most eye-catching change to the institute’s forecasts since its last report three months ago was a large expected increase in the Government’s budget deficit in 2010.
In April, the think tank had expected a shortfall in revenues over spending of 12 per cent of GDP. It now believes this figure will reach almost 20 per cent, far above the 14.3 per cent registered in 2009. This all but guarantees that Ireland will run the largest deficit in the 27-member EU for the second consecutive year.
The changed forecast follows a decision in late April by Eurostat, the EU’s statistics agency, to classify as expenditure, rather than investment, money given to Anglo Irish Bank to prevent its collapse. As the ESRI sees no reason why even larger forthcoming payments, of €12.9 billion, to Anglo Irish and Irish Nationwide would be treated any differently by Eurostat, it felt obliged to reflect this in its forecasts.
The institute made clear that this accounting reclassification was the sole reason for its changed deficit forecast and that the underlying budgetary position for 2010 is stabilising as anticipated in its previous forecast.
Dr Alan Barrett, co-author of the report, acknowledged the risk that the revelation of such a large deficit could unsettle international markets upon which the Government depends to fund its deficits.
The ESRI maintained its strong support for Government plans to reduce its underlying budget deficit, citing the “vagaries of market sentiment on our sovereign debt” in the wake of Greece’s bailout.
It does not, however, suggest that harsh deficit reduction measures are without their own costs. It estimates that planned spending cuts and tax increases will reduce growth in the economy in 2011 by one percentage point.
Joan Burton, Labour’s spokeswoman on finance, said the predictions “confirms the scale of the jobs challenge facing Ireland, and the urgent need for a jobs strategy”.
Fine Gael finance spokesman Michael Noonan said the Government had “to make job creation and protection an absolute priority”.