Country Report Ireland January 2009

Outlook for 2009-10

• The extent of downside risk to the Irish economy is without precedent. Even the Economist Intelligence Unit's current forecast, of three successive years of negative economic growth, may prove optimistic.
• We expect the economy to suffer a sharp contraction in 2008-10, because of the collapse in the construction sector, depressed private consumption and falling exports.
• The Irish banking system remains in a precarious state despite liability guarantees and public recapitalisation. The full nationalisation of most or all of the banks is a small but conceivable possibility over the outlook period.
• The rejection of the EU's Lisbon treaty by voters in June 2008 has generated a crisis in Ireland's relations with the EU. Its membership of the bloc might be put at risk if a second referendum is not passed by voters.
• From balance in 2007, the budget deficit is estimated to reach 6.6% of GDP in 2008 and over 10% in 2009-10. Deficit funding issues could arise as massive bond issuance creates problems for fiscally weak countries such as Ireland.
• Despite daunting challenges over the forecast period, we expect the coalition government to remain in office.

Monthly review

• The government is losing support rapidly as its handling of the economic crisis comes in for growing criticism. The slow response is the result of some complacency and a great deal of shock at the rapidity of the downturn.
• One reason for the inadequate and slow response to the fiscal crisis is the desire of the taoiseach (prime minister), Brian Cowen, to agree any stabilisation plan in advance within the social partnership mechanisms.
• The government committed to holding a second referendum on the Lisbon treaty by the end of October 2009, following its rejection in a referendum in June 2008.
• The government announced a recapitalisation plan for the three main Irish banks on December 21st. The deal will see the government initially inject 5.5bn in the form of preference shares into three banks.
• Unethical behaviour at Anglo Irish Bank has led to the resignation of its senior executives and the early retirement of the financial services regulator.
• The budget deficit soared to 12.7bn in 2008, compared with a deficit of 1.6bn in 2007, as tax receipts fell by 14% and spending grew by 10%.
• GNP contracted by 4.9% year on year in the third quarter of 2008 and domestic demand fell by 3%.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15
NAICS Code: 23

This report covers the following industry codes:
SIC Code: 15
NAICS Code: 23