Forecast offers one area of growth - the misery index

OPINION:THE MUCH-hoped for recovery oftentimes seems like a mirage.

Three months ago the Central Bank’s economists thought something resembling a recovery would take hold in 2012. They don’t anymore. Yesterday they slashed their growth forecast for this year. GDP will inch up but the domestic economy will shrink by far more.

The main reason for the downward revision to growth forecasts is the shock to Europe’s real economy caused by the debt/financial crisis they say. This will dampen export growth.

Instead of the first increase in jobs in five years, as the bank expected three months ago, 2012 will bring a further contraction in employment. The rate of joblessness will creep up

Despite the absence of demand, the Dame Street technocrats have more than doubled their inflationary expectation for 2012. Prices, as measured by the EU harmonised index, will rise this year not by a mere 0.7 per cent, as forecast in October, but by more than twice that, at 1.6 per cent. They mostly blame the Vat hike.

Back in the 1970s, when inflation ran out of control, economists invented a “misery index” by adding the rates of unemployment and inflation. The higher the index, the more miserable everybody feels. By this measure, according to the Central Bank’s new figures, misery will reach a post-crash high this year.

As if all that wasn’t bad enough, the bank added for good measure that “uncertainty remains high”, “markets remain tense” and, with glorious understatement, that the euro crisis had “exposed shortcomings in economic governance not evident during more favourable times”.

If all this tempted those attending the briefing yesterday to consider taking the fastest way down from the bank’s seventh-floor conference room, some fillip was provided by the think-tankers at the National Economic and Social Council on the other side of the Liffey.

In a 140-page tome, NESC – a multi-tentacled creature of social partnership – made recession-busting proposals by the dozen. It repeated the potential of the embryonic National Employment and Entitlements Service to reduce unemployment.

The continued failure of the Government to set out the details of how the service will work has become a farce. Given the massive job of implementing the reforms that will be required before it is effective, the continued dithering is an affront to the jobless. It also adds to the growing pile of evidence that points to this Government being almost as timid as the last one.

NESC went on to urge the Coalition to get on with setting up the strategic investment bank mentioned in the Programme for Government and joined a long list of organisations calling for private pension funds to repatriate money invested abroad and plough it into the domestic economy.

Fascinatingly, the report compares the net financial worth of Irish households to the big and rich G7 democracies. At 375 per cent of disposable income, Japanese households were richest in 2009. French ones were poorest, at 201 per cent. Irish households’ net financial assets amounted to just 94 per cent of disposable income. By this measure of wealth we are the poorest of the rich.