Employers' group Ibec has revised its economic forecast upwards saying that the economy will pull out of recession during 2010 and return to annual growth the following year.
In its latest quarterly economic review, Ibec says it expects the drop in Gross Domestic Product (GDP) to be less than previously forecast.
The group predicts that GDP will decline by 1.6 per cent next year compared to a previous forecast of 2.9 per cent. It also suggests that the economy will return to growth of about 1.7 per cent in 2011.
Ibec also says it believes consumer spending will fall by 3 per cent in 2010 before expanding 1.5 per cent the following year.
Unemployment is expected to stay below 14 per cent next year, the organisation said.
Ibec said that despite its revised forecasts, major problems remain due to the public finance deficit and an erosion of competitiveness.
Although it forecasts that exports will 3 per cent in 2011, it warns that a resumption of export-led growth is contingent on taking corrective action now.
“We believe that the current relatively short window of deflation must be seen as an opportunity to make progress on the major policy challenges of addressing our competitiveness difficulties and correcting the public finances. Ireland has no option but to cut our cost and wage levels closer to those of our trading partners,” said Ibec chief economist Fergal O’Brien.
