| Author (Person) | Brown, John Murray |
|---|---|
| Series Title | Financial Times |
| Series Details | 5.11.09 |
| Publication Date | 05/11/2009 |
| Content Type | News |
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The OECD published its Economic Survey of Ireland for 2009 on the 4 November 2009. Ireland is in severe recession, following several years of high but ultimately unsustainable growth and rising imbalances. A fast expansion of bank credit encouraged a boom in construction activity and property prices, which fuelled domestic spending more widely. This cycle has now reversed dramatically. Output is expected to contract sharply and unemployment is likely to reach 14%. The banking sector, which was at the heart of the credit expansion, has been severely hit by the crisis in international financial markets and faces large losses on heavy property related lending. Credit conditions have tightened. A return to normal functioning of the financial system is needed and a range of policies is in place to restore the banking system to good health. An economic recovery is likely to begin next year but a protracted period of adjustment will be needed to resolve economic imbalances built up during the expansion. Competitiveness deteriorated during the upswing and the strong real exchange rate is hindering the return to growth. Restoring competitiveness inside monetary union will occur through downward adjustment in wages and prices, which appears to be already underway. With fast rising public debt, fiscal consolidation, which has begun, will be needed over an extended period. For the longer term, lessons should be learnt to avoid macroeconomic imbalances arising on this scale again. |
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| Countries / Regions | Ireland |
