The Irish economy will return to growth in 2010 and will see expansion of 4 per cent in 2011, according to a Davy research report published this morning.
Rossa White, chief economist, said the economy would return to a growth trend during the first quarter of next year, with expected average annual growth of 0.5 per cent in real GNP in 2010.
He added that would conceal "gradual acceleration" in economic activity intra-year. The forecast implies a peak-to-trough decline in GNP of 14 per cent from the third quarter 2007 to fourth quarter 2009.
According to Davy, consumer spending could increase 1.5 per cent as real incomes stabilise and precautionary saving eases, and export growth is "likely to quicken" as Ireland feels the effect of a worldwide economic recovery.
However, the report warns the peak in unemployment will lag the economic trough "by six to nine months", with the unemployment rate to peak below 14 per cent in the third quarter of 2010
It also forecasts that construction output will contract until 2011, while the amount of public services "may decline slightly".
The Dublin-based stockbroker said it was assumed agriculture, industry and private services will expand.
The economy's recovery is attributed to firmer global demand, slowly loosening credit conditions, gradually falling household saving, and growing business investment.
However, the report warned recovery "will not feel that strong on the ground" as domestic demand will lag growth in bottom-line GNP, in addition to the lag in falling unemployment, which is forecast to eventually drop under 12 per cent by end-2011.
The indigenous industry and construction sectors will also lag the recovery trend, Davy said.
The company said a wide range of indicators was examined to indicate growth by early 2010, including survey data, retail sales, tax receipts and industrial production.