THE GOVERNOR of the Central Bank has made a cautious prediction that a gradual recovery may begin in 2010, although he warned that the economy would contract significantly this year and that property prices will fall further.

“We know we’re going to have a very difficult 2009,” John Hurley said in a radio interview with RTÉ News yesterday morning. “A recovery is going to take time, it will be gradual.” The benefits of an upturn will begin to be seen in 2010, Mr Hurley predicted. However, he stressed the need to be cautious and “humble” when making such forecasts.

The shock that emanated from the US, in particular the collapse of Lehman Brothers last September, has translated into a “very, very deep recession” in the real economy, he said, and has had a major impact on the global trading environment.

“It’s going to take time for this to work its way through,” he said.

He noted that some soft data was already providing positive signs of a “bottoming out”. “But we have to await hard data before we can be confident that the corner has been turned.”

“We’ve been involved since September in a process of re-establishing a vibrant financial sector in Ireland,” he continued. “This is going to take time.”

Key issues relating to the valuation of bank loan assets being transferred to the National Asset Management Agency (Nama) “must be faced, and will be faced” in the coming months, he said.

“I think that’s very important to ensure the success of the Nama process,” he added.