One thing that all seem to agree on and that is the Celtic Tiger is history. And if there is ever to be another Irish economic miracle it will have to be denoted by some other kind of animal. Likely one without claws and big teeth
But a miracle of any degree seems a long time in the future; and indeed it may have to follow even harder times than are evident right now.
One observer who keeps national economies on his front burner is Harvard professor and author of “The Ascent of Money,” Niall Ferguson.
“The idea that countries don’t go bust is a joke. The debt trap may be about to spring for countries that have created large stimulus packages in order to stimulate their economies,” Ferguson stated recently.
Ferguson has a list of countries that he thinks are prime candidates to go bust.
Ireland heads this list.
“Ireland, followed by Italy and Belgium, and UK is not too far behind,” Ferguson, who is Scottish, said.
Whether this happens remains to be seen. But the Tiger is for sure bust and resting in the shade of history, this according to the Irish government think tank, the Economics and Social Research Institute.
Even against the backdrop of worldwide economic recovery, the Republic, according to the ESRI, will suffer a permanent 10 percent drop in economic output and that could reach 15 percent if the recovery takes longer to materialize than current forecasts suggest. And that is 2011 at the earliest.
The prospect for the coming years is higher unemployment and more emigration and 2015 is the closest year that might promise something better, the ESRI’s recently published study, “Recovery Scenarios for Ireland,” stated.
According to a story in the Irish Independent, ESRI economist John FitzGerald warned that Ireland’s recovery was also dependant on the Irish government sticking to a policy of higher taxes and reduced spending.
“If that happens and if the global economy recovers in two years’ time, then the best we can expect is that economic output will be back at 2007 levels in 2015,” the report stated.
So things are bad. Just how bad? Well, another recent report places the Republic’s economy in a technical depression, not just a recession.
At the same time, the Republic’s recovery will be quicker than that of the Northern Ireland economy which, in an apparent contradiction, is seen as being in better shape to ride out the present economic travails than the South.
That riding out process, according to an all-island economic forecast contained in the Ernst & Young Economic Eye report, will, however, take longer north of the border than south of it.
The Ernst & Young offering predicts a contraction of almost eight percent in gross domestic product this year on the entire island of Ireland. The Republic on its own is facing a 10 percent decline in GDP from peak Celtic Tiger levels, according to the report, and is effectively in a depression as a result.
“In 2009 alone, the Republic’s economy will contract by 8.9 percent. By contrast, there will be a shrinkage of 2.9 percent in the Northern Irish economy. This will result in a contraction of 7.8 percent in the all-island economy, the Irish Times reported.
“The island economy is in the eye of an unprecedented economic storm and collateral damage is severe,” said economist Brendan Lynch, who acted as an adviser in the drawing up of the “Economic Eye,” report.
“Though early 2009 looks like being the worst period, recovery will be slow and the storm will leave scars on the economic landscape for years,” he said.
The report includes an especially sobering assessment of job prospects. Employment figures in the Republic will not return to their 2007 peak until the year 2021. In Northern Ireland, the recovery in the labor market will be slightly quicker, with peak employment numbers returning in 2018.
“However, an ‘over-reliance’ in Northern Ireland on the public sector and the relatively closed nature of its economy compared to the Republic means that although the downturn will be less pronounced north of the border, the economy there will enjoy less “bounce back” in its recovery phase,” the Times story, drawing upon the Ernst & Young document, added.
“The strength of the Republic’s services sector exports will aid the recovery south of the border, as many of these exports require specialist skills that make the Republic less ‘replaceable’ as a center for producing exports,” the Ernst & Young report stated.
Some 44 per cent of the Republic’s exports are in the services sector, but just six percent of Northern Ireland’s exports are in the services sector. This is among the lowest proportions of the developed economies.
The E&Y report draws different conclusions with regard to the actions of the Irish and UK governments to counter the effects of the economic downturn.
It opines that the Irish government was left with little option but to adopt a radical “tax and cut” approach to correcting its budget deficit. But it takes a dimmer view of the UK government’s “spend and hope” approach.
In casting its eye over the entire island, the report predicts that the slow recovery will mean that in many locations the recession will have a “generational impact” and will deliver severe economic and social hardship to many.