Unemployment to stay high - ESRI

Unemployment will remain high next year but the economy is expected to grow, albeit weakly, according to a new forecast from the Economic and Social Research Institute (ESRI).

In a new paper published this afternoon the institute says the scale of the challenges facing the euro zone have the potential to suppress any significant recovery here.

The institute estimates that job losses will continue to mount in 2012 with the unemployment rate hitting 14.9 per cent before easing slightly next year to 14.7 per cent.

It says emigration levels, particularly among young people, are expected to limit the impact on the unemployment rate over the next 18 months with employment opportunities expected to rise late next year.

The ESRI forecasts that gross domestic produce (GDP) will grow by 0.6 per cent this year but remain unchanged when measured by gross national product (GNP) - a narrower measure of economic activity which excludes multinational firms.

GDP is expected to rise by 2.2 per cent in 2013 with GNP increasing by 0.5 per cent.

The ESRI says with domestic demand still expected to act as a drag on the economy this year, exports will again likely be the principal factor determining growth in the Irish economy.

In terms of public finances, the institute says it expects the EU-IMF programme targets will be comfortably met this year but that targets for 2013 "will prove more challenging."

It adds that household consumption is likely to weaken further this year and next year as disposable incomes continue to decline.

The institute says that with house prices weak and demand levels remaining low, it is unlikely that there will be growth in the volume of house building in the near future.

"It is difficult to be more precise as to when the bottom of the cycle will be reached but an important factor in any stabilisation will be price expectations. Continued uncertainty about prices, combined with a desire to see a sustained stabilisation before people enter the market means that housing demand is likely to remain weak in 2013."

In its forecast the institute warns against attempts to domestically stimulate the Irish economy.

"In a small open economy such as Ireland much of the impact goes directly on imports and does not lead to sustained growth. In order to grow, the Irish economy needs competitiveness gains and export growth."