Ireland's return to economic growth in 2010 is likely, as the global recovery continues to boost exports, according to a report from Bank of Ireland.
According to the report, the recession in Ireland has seen a substantial rebalancing in the economy, away from domestic demand and towards exports.
It predicts that domestic demand is likely to remain weak for some time.
Dr Dan McLaughlin, BoI chief economist, said: 'We expect Irish exports to benefit, picking up in the coming months and expanding more strongly in 2010.
'This export-led growth remains the most likely driver of an Irish recovery as some key components of domestic demand remain weak.
'Consumer spending, for example, has been constrained by falling employment, flat to negative wage growth, a rise in the tax rate and a rise in the savings ratio.'
The report noted that house building is falling by 50% a year and now accounts for only 3.3% of real GDP from 11.5% in 2005. Construction as a whole is under 12.5%, virtually half its share of GDP at the peak of the boom.
It said households have cut discretionary spending in order to rebuild savings, which may exceed 12% of disposable income this year, from 2.3% in 2007.
Exports, which have held up remarkably well amid an unprecedented plunge in global trade, amounted to 88% of GDP in the second quarter, from 79% in 2006.
It noted that the deflation cycle also appears to be at a turning point, and expects the annual inflation rate to return to positive territory in the second half of 2010
It said that employment is likely to continue to fall in the near term, although the exodus of immigrant labour means that the unemployment rate is likely to average 13.3% next year and peak around 13.5%.
