IRELAND FACES A 1930s-scale Great Depression if action is not taken to quell the crisis in the eurozone, an ESRI economist has warned.
Joseph Durkan, associate research professor at the economic think tank, said even though Ireland is doing what we’re “supposed to do” to cope with the downturn, problems in the eurozone could send the country into a catastrophic economic spiral.
He warned that unemployment could rise to 20 per cent if action is not taken.
Durkan’s comments came as the ESRI dramatically cut its growth forecast for Ireland for next year. GDP is now expected to grow by just 0.9 per cent, a reduction from the think tank’s previous forecast of 2.3 per cent.
Meanwhile, GNP is expected to contract by 0.3 per cent. The ESRI said slowing growth in exports would not be sufficient to counterbalance government austerity measures and continuing weak demand at home. Three months ago, GNP had been forecast to increase by 0.7 per cent.
Disposable incomes will continue to fall across Ireland next year, the think tank warned in its latest Quarterly Economic Commentary. This is likely to have a knock-on effect across the retail and service sectors, with consumption forecast to fall by 1.5 per cent.
The figures mean a significant knock-back from relatively good conditions this year, in which GDP is expected to grow by 2.2 per cent and GNP by 1.2 per cent.
Speaking on RTÉ’s Morning Ireland, Joseph Durkan said the slowdown was largely due to events beyond Ireland’s control. “We’re doing what we’re supposed to do, but the world around us is falling apart,” he said. “The truth is we don’t know how bad it’s going to be yet.”
He said the ECB needed to move away from “half-hearted bond buying” and take decisive action to reassure markets. “What they should say is that they will do whatever is needed [to rescue countries in difficulties]. That would give the markets an entirely different view.”
He said the prospect of another Great Depression was real, and that this was the “spectre” that he hoped would force governments into taking real action.