Country Report Ireland March 2009

Summary

The extent of downside risk to the Irish economy is without precedent. Even the Economist Intelligence Unit's current forecast, of four successive years of negative economic growth, may prove optimistic.
Our central forecast is that the coalition government remains in office, but the risks to that forecast are rising.
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 budget deficit is estimated to reach over 12% in 2009-10. The risk of default is real and will become much greater if emergency measures to be introduced in April are not fully credible.
The Irish banking system remains in a precarious state despite liability guarantees and recapitalisation by the government. The full nationalisation of all of the banks is possible 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. We expect acceptance in a second vote in October 2009, although this is far from certain.

The two-party coalition government continues to struggle to deal with an exploding deficit, a banking crisis, soaring joblessness, street protests and the collapse of 20-year old social partnership structures. It is deeply unpopular.
In early March the government announced that it intends to introduce a supplementary budget. It has invited the opposition parties to make policy submissions as input into the formulation of the new budget.
According to financial markets, Ireland faces a rising risk of default on its sovereign debt. The German minister of finance and the European commissioner for economic affairs have hinted at bail out plans.
A year-on-year fall of 31% in total tax collected in February 2009, following a 19% decline in January, suggests that the collapse in revenue in evidence since the final quarter of 2007 is not stabilising and may be accelerating.
Employment growth has turned sharply negative, from year-on-year growth of 2.6% in the first quarter of 2008 to a contraction of 4.1% in the fourth
During 2008, by contrast, the unemployment rate has surged, from 4.9% in the first quarter to 7.9% in the fourth, and other data show that it surged even more rapidly in early 2009.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;59;39;2834;80
NAICS Code: 22;44;31;3254;62