ESRI predicts jobless rate of nearly 10%

Some 117,000 jobs will go next year and unemployment levels will rise to an average of 9.4 per cent , despite an estimated 50,000 people emigrating, according to a report to be published by the ESRI tomorrow.

In its Quarterly Economic Commentary, ESRI economists are predicting that GNP will shrink by 4.6 per cent in 2009, coming on top of an anticipated 2.6 per cent contraction this year.

The report, compiled by Dr Alan Barrett, Dr Ide Kearney and Jean Goggin, had an embargo placed on it until midnight tonight but, following the publication of some elements of the report in a national newspaper this morning, the think-tank said media organisations with websites could publish details of it this afternoon.

It describes the Republic as being in the midst of a contraction "that is large by both historic and international comparisons" and said GNP would fall by 4.6 per cent in volume terms. "Coming after an anticipated contraction of 2.6 per cent in 2008, the accumulated fall in output is dramatic."

It predicts that the volume of consumption will fall by 3.6 per cent next year while the fall in investment "is expected to be larger still". It is forecasting a fall of 19.3 per cent in investment volume in 2009.

The report says that as a result of the "deterioration in the public finances" the Government will struggle to pay the 3.5 per cent wage rise due next September under the national pay agreement. It says the "possibility of pay cuts in the public sector should at least be considered in this context as pay cuts may well be considered preferable to cuts in services."

"We argue that the social partners need to come together and to reassess the most recent pay deals in the light of rapidly changing circumstances. The possibility of pay cuts in the public sector should at least be considered in this context as pay cuts may well be considered preferable to cuts in services.

"As well as protecting services levels, the pay adjustment approach could well yield expenditure savings more rapidly than an approach based solely on job cuts through natural wastage, early retirements and redundancy schemes.

It says "the focus of policy should be on ensuring that Ireland is as well placed as possible to participate in the global upturn.

"We need to ensure that the public finances do not become a constraint on growth, as they did in the 1980s," the report says. "With this in mind, we would stress yet again the importance of ensuring quality in all public spending, whether current or capital," the report adds.