Employers' group IBEC believes the economy will return to growth next year despite the bigger than anticipated measures needed to cut the budget deficit over the coming four years.
IBEC economist Fergal O'Brien said it had lowered its economic forecasts for 2011 and 2012 to reflect the impact of a series of more difficult than expected Budgets. The organisation's latest report on the economy says the Budget measures are likely to knock 1.5 to 2.5 percentage points off growth over four years.
But IBEC still expects the economy, as measured by gross domestic product, to grow by 2% in 2011.
Mr O'Brien said the Irish export sector had performed strongly. He added that a strong recovery in trading partners such as Germany, coupled with a significant improvement in Irish competitiveness, had boosted export opportunities.
The IBEC report says unemployment will fall back only slowly over the next couple of years. It is forecasting a rate of 13.3% this year and 13% next year.
It warns, however, that the Government faces a 'daunting' task in re-skilling and re-training the workforce, adding that this will be necessary if Ireland is to avoid a prolonged period of structural unemployment.
'Ireland appears to be experiencing a classical labour market mismatch situation, with significant skills shortages in some areas, such as IT and specialist sales occupations, coupled with oversupply in other occupations,' the report says.
