Ernst & Young issue gloomy prognosis

Scofflaw

A gloomy prognosis from E&Y:

Ireland's economy will shrink again next year and unemployment will head toward 16pc, a gloomy report on the country's prospects from Ernst & Young has said. Further austerity measures may be needed, it says.

While the Department of Finance expects growth of 1.75pc next year, the global accountancy company is forecasting a contraction of 2.3pc in terms of GDP.

The Government's projections were "overly optimistic'' and further austerity measures would be needed to rein in the deficit, the company claimed.

While the Government is expecting average growth of 2.75pc between 2011 and 2014, Ernst & Young estimated growth of just 0.8pc was more likely.

The company said it would be a challenge for the Government to fix the banks once and for all and to also control what it called "civil unrest".

Early elections may delay the latest cuts and tax increases and a new government "may even back away from some of the announced measures", claimed Ernst & Young.

"These factors increase the likelihood of some form of debt restructuring by the Government and banks,'' claimed the company in an analysis included in its eurozone outlook.

It said the recent €85bn IMF/EU package does end uncertainty for Ireland, but final tests were needed to see what the banks required in terms of extra capital.

...

"The main drag on Irish GDP growth in the next two years will come from domestic demand," it said.

Ernst & Young said this demand would be hit by a range of factors, including the austere budgets, but also by the scale of migration from the country and a likely rise in interest rates. The company pointed out that those leaving would be bringing with them skills and purchasing power.

"As such we do not expect the domestic economy to recover until a number of years into the fiscal adjustment cycle and until after the banking system is restored to health," it said.

http://www.independent.ie/business/irish/economy-to-shrink-again-in-2011-report-predicts-2459506.html

I would say that's probably an accurate prediction. To be honest, I would expect mortgage and other domestic debt to act as a drag for a couple of years after the current austerity programme ends - which suggests at least 5-6 years of either recession or low growth.

cordially,
Scofflaw

dan_d

Nice cheerful news for this job-seeker early in the morning!!

Emigration it is, so.

RichardAnd

Seems reasonable. What I would disagree with is the unemployment prospect of 16%, I don't see it rising that far. I'm saying this not because I believe there will be significant job growth, but rather because I'd imagine emigration will keep the dole figures from rising too far above 13% or so.

Anonymous1987

The main drag on Irish GDP growth in the next two years will come from domestic demand. Beside the direct negative impact of the fiscal measures, growth will be dampened by a range of related factors that include a large out-migration flow of people (and their skills and spending) and a likely rise in retail interest rates that will impact on consumer spending and housing repossessions. Meanwhile, the large excess supply of housing that may take years to clear will be a significant drag on residential investment. Against this backdrop, the prospects for business investment are also bleak.

Full report here, projections are on page 2.

In contrast, the EC's most recent projections (projections are on page 4) released November 29th seem to think unemployment will recover somewhat with 13.5 in 2011 to 12.7 in 2012 respectively although it also shows a contraction of -4 in the employment rate for 2010. The EC is more optimistic for growth forecasting GDP, 0.9 for 2011 and 1.9 for 2012. whereas the real growth rate give by E&Y when you factor in consumer prises (in the absence of a GDP deflater) is -0.9 for 2011 and 1.3 for 2012.

The unemployment rate and its effects on private consumption seems to be the main contrast I can see between E&Y and the EC. Strangely the E&Y figures are more optimistic for trade in 2010. I'd be more inclined to agree with the EC figures to be honest.

swampgas

Early elections may delay the latest cuts and tax increases and a new government "may even back away from some of the announced measures", claimed Ernst & Young.

This is like watching a car crash in slow motion. Almost everything I have read or heard in the media suggest this is exactly what's happening. The opposition parties have decided that the way to get elected is to run on a populist platform, selling the idea that there is an easier way out. We can default, or we can re-negotiate or we can somehow ignore the deficit and magic our way out of our problems.

I can't imagine the IMF/ECB are impressed.

Permabear

This post has been deleted.

Scarab80

The difference six months makes eh?

Ernst & Young Eurozone Forecast Summer 2010

As a result of core economic and competitiveness fundamentals and fiscal measures already in place, Ireland is unlikely to endure a “lost economic decade” and GDP is expected to return to relatively strong rates of growth in the medium term, well above the growth rates forecast for Greece and Portugal. After posting a rise of around 2.5% in 2011, average annual GDP growth in 2012-14 is predicted to range between 3.5% and 4%.

RichardAnd

donegalfella wrote: »

This post has been deleted.

Just on the matter of unemployment. I seem to recall RTE new saying that about 100k jobs could/will be lost in 2011. RTE being RTE, they never backed an iota of this up or explained how such figures were arrived, can anyone verify this or did I dream it?

But I do stand by my original post in this thread, that percentage of unemployed persons will never reach 16%. It just seems that emigration has really started to kick in over the last few months. But, better people emigrate than throwing their lives away on the dole.

dan_d

RichardAnd wrote: »

J
It just seems that emigration has really started to kick in over the last few months. But, better people emigrate than throwing their lives away on the dole.

I do agree with you, and it's probably the one thing we do that other countries don't.But...it's a terrible indictment of what went on in the last 10 years that we are now building emigration into our country's economic policies.

RichardAnd

dan_d wrote: »

I do agree with you, and it's probably the one thing we do that other countries don't.But...it's a terrible indictment of what went on in the last 10 years that we are now building emigration into our country's economic policies.

Wow, that was a quick reply

Well I wouldn't say we're actively building emigration into any economic policy, rather it's just something that's going to happen. However, I really am of the opinion that emigration is just something Ireland will always have to deal with.

The only time in our history (since the famine) where we had a respite from this old companion of ours was the boom period which was a castle build on sand using dodgy celtic tiger building standards. I really think we shouldn't fool ourselves that we'll ever be anything other than an unremarkable country with little indigenous industry and poor resources.

Nolanger

If only we had groundhogs in Ireland.

kaiser sauze

It would seem things are going to get worse before they get better; funny that, I asked a pig this question 6 months ago and he told me the same thing.

Smart creatures, those pigs.

Permabear

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Taxi Drivers

This is what they wrote in the Autumn release

E&Y Autumn Ireland Forecast wrote:

Despite the difficulties the Irish economy is still facing in 2010, the outlook for a return to relatively strong rates of GDP growth forecast over the medium term, well above the growth expectations for Greece and Portugal, are still maintained. This is premised on Ireland’s core economic and competitiveness fundamentals and the fiscal measures already in place. Although additional new fiscal measures will be required for 2011 in the December budget.

Why should we believe them now?

RichardAnd

donegalfella wrote: »

This post has been deleted.

No reason at all, I was just stating my opinion. I, personally, do not think it will reach 17.5%. Now I could be wrong, but it's just what I think.

bamboozle

hold on a second now, the Irish Govt stated that our growth over the duration of the 4 year plan would exceed 2.7% PA, now they came up with this figure based on information received from the staff of the department of finance, now 100 staff of the dept of finance have been paid bonuses so they must be doing a super job to deserve these bonuses.....

thebman

Scarab80 wrote: »

The difference six months makes eh?

Ernst & Young Eurozone Forecast Summer 2010

Well this is it isn't it. If they have both forecasts out there then they will only ever reference the one they were right in later anyway.

Most of our companies customers are the busiest they have been since I joined the company so things have definitely picking up IMO.

I don't really trust these forecasters that don't have at least some knowledge of the Irish economy and how it works although I don't know if Ernst & Young do but I don't suspect they are that heavily involved here (which many would say puts them in a good position to be honest but realistically they will also be at more of a disadvantage with their predictions since they won't have as many data sources/the right ones to go on). There are many Irish economists suggesting that things are picking up and many of them are not the usual government economists either.

While growth probably won't be as large as government forecasts, I think there will be growth and an actual reduction in unemployment shortly.

danbohan

RichardAnd wrote: »

No reason at all, I was just stating my opinion. I, personally, do not think it will reach 17.5%. Now I could be wrong, but it's just what I think.

and emigration in 1985 was at a far higher level than it is now , mind you it might have reached 25% if not for emigration at that time , so i guess your both right

danbohan

bamboozle wrote: »

hold on a second now, the Irish Govt stated that our growth over the duration of the 4 year plan would exceed 2.7% PA, now they came up with this figure based on information received from the staff of the department of finance, now 100 staff of the dept of finance have been paid bonuses so they must be doing a super job to deserve these bonuses.....

i hope they are better at managing their bonus money than they are at managing the state finances

Mongarra

In relation to Ernst and Young and their knowledge of the Irish economy, from publicity over their auditing standards regarding some bank or other (!) I think they must be auditors to many of the larger companies based here and I would think this gives them a good insight into the state of the economy.

Scofflaw

danbohan wrote: »

and emigration in 1985 was at a far higher level than it is now , mind you it might have reached 25% if not for emigration at that time , so i guess your both right

It was 25%+ in the 18-25 age group, as far as I recall. That was why we emigrated.

cordially,
Scofflaw

wilson10

It grieves me to have to agree with Ernst & Young.

Weren't they the auditors who gave Anglo Irish Bank a clean bill of health every year.

Would you trust someone to foretell the future when they clearly showed that they couldn't figure out the past?

irishconvert

Scofflaw wrote: »

A gloomy prognosis from E&Y:



http://www.independent.ie/business/irish/economy-to-shrink-again-in-2011-report-predicts-2459506.html

I would say that's probably an accurate prediction. To be honest, I would expect mortgage and other domestic debt to act as a drag for a couple of years after the current austerity programme ends - which suggests at least 5-6 years of either recession or low growth.

cordially,
Scofflaw

Ernst & Young, aah yeah, the guys responsible for auditing Anglo and giving them the all clear. Right, I'm really going to take anything they say seriously! :rolleyes:

Amhran Nua

RichardAnd wrote: »

Well I wouldn't say we're actively building emigration into any economic policy, rather it's just something that's going to happen. However, I really am of the opinion that emigration is just something Ireland will always have to deal with.

No more so than any small European country. Ireland has a lot going for it, most of all its people, but the political leadership has become a parody of itself at this stage, and that's where real change and direction has to come from.

Anonymous1987

The IMF projections seem to agree more with the EC. The IMF project the same real GDP growth as the EC and extend their projections to 2.4% in 2013, 3% in 2014 and 3.4% in 2015. Forecasts for unemployment are broadly in line with the EC projections also as follows:

Year | Unemployment %| Real GDP %
2011 |13.5|0.9
2012 |12.8|1.9
2013 |12.3|2.4
2014 |11.5|3
2015 |10.7|3.4

See page 36 here.

ei.sdraob

Is this the same Ernst & Young who were auditing Anglo Irish :rolleyes:

The same Ernst & Young facing fraud charges over Lehmans collapse, yes they were auditing them too :rolleyes:


I am sorry but this crowd has no credibility left. Despite being called a doom monger here many of times I would not put any weight on anything they say.

johnnyskeleton

thebman wrote: »

While growth probably won't be as large as government forecasts, I think there will be growth and an actual reduction in unemployment shortly.

I suppose it is a question of what will change over the next few years. We know for a certainty that the government stimulus to the economy (i.e. the deficit spending) will be reduced and eventually stopped. This will mean a drop of GDP and GNP as less money is spent.

I don't see the housing market changing, although I can see NAMA borrowing money to finish projects across Ireland which may lead to an increase in the construction sector. The government are perhaps basing their predictions of growth on another construction bubble catalysed by the stamp duty reforms!

The public sector (a massive part of our GNP) will only decline further.

MNC profits have been the only thing growing in Ireland recently, so we are reliant on them for growth. I believe this will stay reasonably steady because the growth hasn't been due to increased economic activity, but rather due to companies relocating from Bermuda to Ireland.

The smart economy is a myth and we have long since lost much chance of maintaining any sort of manufacturing base here.

So, other than the government's plans to reflate the bubble or attract ever more MNCs to Ireland, the areas where growth might happen are in areas such as agriculture and food.

There are also several hazardous areas, particular the area of mortgage default and the withdrawal of ECB funding, which could make matters worse.

So overall, our economy has to have not just more economic activity, but enough economic activity to counterbalance the reduced deficit spending brought in through the budget. This will have to come from somewhere, and I can't see where it will realistically come from. However, I wouldn't be surprised if we have a few years of stagnation instead of further declines, although GNP is probably likely to continue going down.

As for unemployment, I would hope that the majority of job losses have already taken place. However, I would expect unemployment to rise slowly as more jobs are shed. Realistically, we can account for at least several thousand job losses due to PS redundancies. Whether emigration will keep unemployment at a neutral level as has already been suggested remains to be seen - I'm not sure that would work without a pickup in the world economy.