A NUMBER of factors are starting to fall into place to ensure that economic growth can be anticipated in 2010, according to the special adviser to Minister for Finance Brian Lenihan. Dr Alan Ahearne told an audience in NUI Galway last night that 2009 was a year for stabilisation and that the measures taken last year should result in growth later this year.
Delivering a lecture entitled Between a Rock and a Hard Place – Policy Making in a time of Economic Crisis to a gathering of several hundred people, Dr Ahearne said a number of factors gave rise to optimism.
He said there had been a 5 per cent improvement in unit labour costs in Ireland since the autumn. The unit cost in Ireland dropped 2 per cent in Ireland last year at a time when they increased by 3 per cent in the euro area.
“This is already kickstarting growth. We are starting to gain market share but we need to do more as we lost our competitiveness during the boom years,” said Dr Ahearne.
He said export-led growth would be the engine for the recovery, but that it would probably be 2011 before real impact would be felt after years of over-dependence on house building.
“We are on the road to recovery but it will be a bumpy road. It is still an uncertain world and the financial markets are fragile. “Unemployment is still increasing, although the rate has slowed down.”
He said that as firms expand in the recovery it was crucial banks could provide credit, so sorting out the banking sector was key to this.
“There needs to be a proper sequence of events and that is what is happening.
“Around €19 billion will be transferred into Nama next month and that first transfer will give us a lot of information.”
Dr Ahearne said the remainder should be transferred by the end of September and the cost of recapitalising the banking sector would become apparent in between.