Ireland set for recession this year

By Andras Gergely

DUBLIN (Reuters) - Ireland will this year see its first recession since 1983, but recovery will be faster than when the economy shrank then, a government-funded research body said on Tuesday.

An end to Ireland's decade-long property boom and a slowdown in consumption will lead to a 0.4 percent fall in GNP in real terms in 2008 after rising 4.5 percent last year, the Economic and Social Research Institute, which is independent but partly funded by the finance ministry, said in a quarterly report.

The recession, which ESRI defined as a year-on-year fall in gross national product (GNP), will push the 2009 budget deficit above what EU rules allow.

A more resilient labour market and healthy exports will make recovery smoother than in the 1980s with GNP growing 1.9 percent in 2009. A low level of national debt at around 30 percent of GDP will ease the pressure on public finances as well, it added.

"A huge amount of what we're saying is based on somewhere between a hope and an expectation that the exports can take off," Senior Research Officer Alan Barrett said.

Most of Ireland's exports are sold in the euro area, which has not been as hard hit by the global downturn than the UK or the United States, with the economic activity of Ireland's main trading partners seen recovering next year, ESRI said.

"In terms of 2007, export performance was really strong, especially in services exports," said Ide Kearney, co-author of ESRI's Quarterly Economic Commentary. "Looking forward, we expect services to take up the baton from manufacturing."

"NO DEATH KNELL"