Irish economy to be among worst performing in EU

Ireland is forecast to have the second weakest economic performance in the European Union this year and any recovery is likely to lag behind the rest of Europe.

In its interim forecasts for 2009 to 2010 the European Commission said the Irish economy was expected to contract by 5 per cent this year, the second weakest performance in the EU, behind only Latvia.

The Government deficit will be 11 per cent this year and this will rise to 13 per cent in 2010. Unemployment in the Republic will rise to 9.7 per cent this year and 10.7 per cent in 2010.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said today most European countries should see an end to economic contraction by March or April with the possibility of modest growth in the final quarter.

However, any significant recovery in Ireland is unlikely until 2011 with the Commission forecasting no growth for the State in 2010.

The Commission said euro zone inflation will remain below the European Central Bank target of 2 per cent and gross domestic product in the 16 countries using the euro would shrink 1.9 per cent in 2009, and grow only 0.4 per cent in 2010.

In the euro zone annual inflation would be 1 per cent in 2009 and 1.8 per cent 2010, the Commission forecast. In Ireland, inflation is forecast at 0.7 per cent this year and at 1.8 per cent in 2010.

"The measures to stabilise the financial markets, the easing of monetary policy and the economic recovery plans will enable us to put a floor under the deterioration of the economy this year and create the conditions for a gradual recovery in the second part of 2009," Mr Almunia said in a statement.

The European Central Bank wants to keep inflation below, but close to 2 per cent and has cut interest rates by a total of 225 basis points in four moves since October as the economy and inflation slow sharply.

The bank forecast on December 4th that 2009 growth in the euro zone would be in a range of -1.0 to 0.0 per cent and between 0.5 and 1.5 per cent in 2010.

Additional reporting Reuters