Ireland will again become "one of Europe's best performers" as an export-led recovery drags it from the worst banking crisis and recession in its history – according to the Centre for Economics and Business Research.
The latest forecasts predict 2 per cent growth in gross domestic product this year, rising to 4 per cent by 2013. And strong exports will "gradually pull the economy out of its trough" – said the Cebr in a new report. As a result of the improved economic outlook, the cost of 10-year government bonds is expected to fall to 4 per cent by 2015. Last week yields dropped below 9 per cent for the first time since February.
A severe banking collapse and property crash led to Ireland being one of three European Union countries, along with Greece and Portugal, to require a financial bail-out from the EU and the International Monetary Fund. But now austerity measures implemented in the wake of the €78bn rescue deal are having a positive effect, the London-based think-tank said.
"When we said a year ago that Ireland would turn the corner in 2011, few believed us. But there is now increasing confidence, reflected in falling bond yields, that this will happen," said Douglas McWilliams, Cebr chief executive
. "With a strong export economy and a successful 'internal devaluation' Ireland is set to be one of Europe's best performers." He added that the British chancellor George Osborne could learn lessons from Ireland's success.
Today the European Council said that Ireland, along with Portugal, was on track to meet the terms of its financial assistance programme – meaning the next €7.5bn installment of bail-out loans would be released. Ireland will receive €2.5bn in September and €3bn in October from the EU, €1.5bn from the IMF and €0.5bn from the United Kingdom. Portugal will receive €11.5bn, part of its €78bn EU and IMF rescue deal.
But Oliver Hogan, who co-authored the Cebr report, warned that the "party is not about to start again". He said: "People will spend less this year and then face four to five years of only modest growth in living standards. And unemployment will remain high for the near future." Consumer spending is predicted to fall 2 per cent this year.
Likewise finance minister Michael Noonan, speaking to a parliamentary committee, said there was no room for complacency. "Our deficit remains unsustainably high and economic recovery alone will not be sufficient to correct this," he said, warning of further spending cuts and tax rises to come.
Nevertheless, the positive outlook followed more good news for Ireland – where the economy contracted by 10 per cent of GDP in 2009, at the height of the recession –when the billionaire investor Wilbur Ross said earlier this week that the country would "once again become the Celtic Tiger".