ESRI urges bigger Budget measures

Thursday 01 September 2011 14.14
ESRI says world slowdown to affect Irish recovery
ESRI says world slowdown to affect Irish recovery

The Economic and Social Research Institute says a weakening in the US and British economies could undermine Ireland's fragile economic recovery.

It has also urged the Government to cut the budget deficit by more than the €3.6 billion required by the EU-IMF programme, and says competitiveness gains should come through reducing general costs and prices rather than by further wage cuts.

In its latest quarterly commentary, the ESRI says the international economic situation has become more challenging because of a slowdown in the US and British economies, and disappointing growth in the euro zone. These are Ireland's three main export markets.

Nevertheless, it says GDP could grow by 1.8% this year, while GNP, which strips out multi-national profits, could grow by 0.2% this year and 0.7% next year, with more indigenous firms increasing their export business to compensate for a lack of demand at home.

The ESRI says action on reducing costs and prices - rather than cutting wages - would help to boost economic growth by improving competitiveness.

It says the July deal on reducing the costs of the EU-IMF bail-out funds was very positive for Ireland, and because less money will be needed for interest payments, the deficit should fall more quickly. But it urges the Government to cut the deficit by more than the €3.6 billion required by the EU IMF programme, and aim for a €4 billion cut in December's Budget.