Revised economic report paints a gloomy picture

By Andrew Bushe

DUBLIN — The prospects for the Irish economy next year have been downgraded by the leading economic think-tank the Economic and Social Research Institute which says in its latest report that “considerable uncertainties remain.”

In October it expected GDP growth of 3.4 percent in 2002, but its final quarterly report for the year is more gloomy and predicts it will be only 3 percent and it says this will depend on the speed of the recovery in international economies.

The report is due to be released Thursday.

It had expected that growth this year would be 6.4 percent but it now thinks the deceleration of the economy was not as severe and the eventual outturn will be 6.6 percent.

It forecasts further bad news on the jobs front with unemployment exceeding 5 percent next year up from the record lows this year. It had expected unemployment to rise to 4.2 percent in 2002.

It expects inflation to average 3.7 percent next year, up from its October prediction of 3.1 percent.

It also approves of Finance Minister Charlie McCreevy’s 2002 budget, describing it as “mildly stimulatory,” which is appropriate for the economy at the moment.

“The public finances will deteriorate significantly compared to recent years, though in contrast to most EU countries, the important general government surplus, while declining, will be in surplus,” the report says.

“The new phase of lower growth in the economy means that real choices, postponed through the period of rapid growth, between increased public expenditure and increased taxation must be addressed.

“Otherwise, the specter of widening government deficits will limit the ability to cope with unexpected shocks the economy may experience in the coming years.”