Ireland’s economy will shrink at the fastest pace in the country’s history this year as unemployment rises and consumers reduce spending, according to Goodbody Stockbrokers.
Gross domestic product will contract 6 percent instead of the 4.2 percent previously forecast, Dermot O’Leary, chief economist at Dublin-based Goodbody, wrote in a note today. Employment will fall 6 percent and consumer spending will decline 7 percent, he said.
“Ireland is in the midst of one of the most severe recessions in the developed world in decades,” O’Leary said. “The short-term outlook for gross domestic product is becoming more irrelevant. The real question is whether Ireland can get its fiscal house in order.”
The Irish economy is shrinking at the fastest pace in the euro area as a property slump deepens and unemployment rises at a record pace. Retail sales plunged the most last year since 1982. The government, grappling with a widening budget deficit, last week pumped 7 billion euros ($8.9 billion) into Bank of Ireland and Allied Irish Banks Corp (ALBK) as the lenders grapple with rising losses on property loans.
The country’s economy will shrink 2.5 percent in 2010 and the budget deficit, as a proportion of GDP, will reach 12 percent this year and 13 percent in 2010, O’Leary said. That compares with the European Union limit of 3 percent.
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