Celtic Tiger’s 2011 Economy Calls for Public Austerity, Says Ernst & Young
Ernst & Young has released a gloomy prediction of the Ireland’s economic status next year, and the figures, it said, may force the public to cut spending as the Celtic Tiger’s economy will likely go down to 0.8 percent growth by 2011 in contrast to the government’s average 2.75 percent forecast.
The global accountancy firm said domestic demand will be sure to drag Celtic Tiger next year in terms GDP, which it claimed would shrink to 2.3 percent against the 1.75 percent growth forecasted by the Irish’s Department of Finance.
Factors such as budget cuts, migration rates that would drain skills and purchasing power in the country, and increase in interest rates, have affected this demand, Ernst & Young said.
Ireland, which enjoyed a rapid economic growth from 1995 to 2007, would not likely recover next year from the fallouts of the 2008 economic meltdown as in the economic forecast of other countries, with the unemployment rate expected to rise 2 percent to 16 percent from 14 percent in 2010.
Although the IMF/EU has granted Ireland a €85bn package to address the volatile economic environment of the country, the Celtic Tiger still faces risks from the “civil unrest,” referring to the extra capital requirements of the banks. Ernst & Young added that for the Celtic Tiger to recover from the financial meltdown, the banks and government need to restructure their debt, but would take some time given the challenges they need to face in the long run.
Even with the €35bn of funding reserved for the banks, Ernst & Young said recovery of the Celtic Tiger would still depend “on the results of banking tests and stress analysis.”