Upbeat view on growth for 2002

The economy will not fall into recession next year, according to a survey of chief executives.

Despite the downturn, the poll of the 1,000 largest companies in the State said an overwhelming majority remain optimistic that the economy will expand in 2002. Only 5 per cent of respondents expected it to contract.

However, one third of respondents reduced staff numbers during 2001, and half expected further reductions next year.

The survey also said most chief executives expect inflation to remain stable, or to fall, and most also expect interest rates to fall. Transport and infrastructure was identified as the most critical issues facing the Government, according to Insignia Richard Ellis Gunne and DCU Business School, who conducted the survey.

On the overall economic outlook, 74 per cent of respondents expected growth of up to 3 per cent, while 21 per cent expected growth of 4-6 per cent. Such growth rates contrast with the double-digit growth seen when the boom was at its height.

Respondents attributed the slowdown to weaker demand in the technology sector and contraction in the US economy, which is now officially in recession.

More than half of respondents said the US economy would not recover for up to two years and only 3 per cent saw a turnaround within six months.

In addition, 97 per cent of respondents said the attacks on the US on September 11th would act as a further constraint on growth. Some 64 per cent of chief executives believed the impact of the attacks would be "significant" while 33 per cent felt the impact would be "very significant".

Some 96 per cent of respondents expected foreign direct investment to fall in 2002, indicating that a key driver of record growth rates in the late 1990s was likely to fade further as the slowdown continues.

The attraction of such investment was seen by 21 per cent of respondents as one of the most critical issues facing the Government.

On inflation, 61 per cent expected the consumer price index to rise by 4-6 per cent next year, while 35 per cent expected it to increase by 1-3 per cent. Some 4 per cent expected inflation to rise beyond 6 per cent.

Three in four respondents said interest rates would fall again next year as the European Central Bank attempted to prompt growth in the euro zone. Some 17 per cent said rates would remain stable and 8 per cent said rates would increase.

On investment, 78 per cent said their top three preferred options included the equity markets, compared with 48 per cent who listed bank deposits.

Some 47 per cent listed Irish residential property and 31 per cent listed Irish commercial property.