The Irish economy is heading in the right direction, a new economic report said today, with the decline in GDP set to ease to 1 per cent in 2010.
This compares to a 7 per cent fall in 2009, the report from Bloxham stockbrokers said.
The export sector will play a large role in the economy's recovery, it said.
"The trade performance last year was quite impressive by international standards, but we cannot afford to rest on our laurels and assume everything will be ok as the US economic picture improves," Bloxham said.
"Further significant cost adjustments need to be made so that a leaner and meaner Irish export model can maximise the potential external trade gains for the country going forward. However, we are confident that this can be done."
However, prices and wages need to fall by a further 10 per cent to increase competitiveness, Bloxham said.
Irish homeowners are likely to be hit with interest rate hikes during the year, despite the fact that the European Central Bank is not expected to raise its interest rates until late 2010 or the first half of 2011. The report also predicted house prices would continue to fall, shedding another 10-15 per cent in 2010.
Bloxham said the jobless rate would remain at about 7-8 per cent in the coming years, due to a high level of unskilled workers in the economy. Unemployment is "close to peaking" in the 12.5 per cent to 13 per cent range, it said.
"Although further job losses are likely in the first half of this year, particularly in the retail and financial services sectors, we don't expect a major rise in the unemployment rate in 2010 and in fact still believe we are close to a peak. We're certainly not going to hit 17 per cent which was being forecast by some analysts at this point last year," the report said.
"We don't see the jobless rate returning to the 4.0 per cent level again unless major policy initiatives are taken to 'up-skill' a significant part of the workforce."
The Government should also consider selling off State assets to ease the pressure on the public finances, or consider privatisation, it said.
