Waterford and the South East is experiencing a serious economic slump at present but, according to a number of leading business figures, the situation is being made worse than it should be by a massive loss of confidence that is not warranted.
“We are in a slowdown and a period of serious adjustment following an unparalleled 20-year boom but we are not in recession”, a respected economist, told The Munster Express. “Markets live and die on expectations and commentators should be careful about creating self-fulfilling prophecies”, he warned.
“What is happening is that the giddy boom years of the last decade or so are over and reality has returned. But that reality is not the desperate situation some commentators are making it out to be”, he maintained.
The Economic and Social Research Institute (ESRI) warned this week that the country would experience a recession later this year followed by a return to net emigration next year. It predicts that the economy will reduce by 0.4 per cent this year while domestic spending will fall by 2.6 per cent. However, the ESRI expects economic growth to resume next year with a forecast expansion rate of almost 2 per cent.
There is no denying that the number of people out of work continues to rise. The downturn in the building industry is the main driving force behind the slump and informed sources say that, with a handful of minor exceptions, there will be little or no house building in Waterford or anywhere else in the region by September.
“The construction slowdown is unprecedented in living memory and will result in thousands of lay-offs, not only on building sites themselves but in many downstream industries and professions associated with the sector”, said a prominent businessperson of many years standing.
A figure arrived at from the estimates of several industry sources suggests that there are several hundred unsold new houses in the Waterford area at present and a high but unknown number of mature homes either on or available to the market.
It is known that the banks and building societies have tightened up their lending criteria in the wake of the sub-prime lending scandal in the United States. That has hit building companies but it has to be remembered that the construction graph could not keep moving upwards. When the financial boom caught hold twenty years ago, there were not enough houses to satisfy demand but that is no longer the case. The industry is now looking to government to create incentives that will inject fresh life into the sector.
According to many experts, times are certainly tougher but much of the current worry and panic is unnecessary. The economy is still basically sound and while inflation and interests rates are rising, they not going to spiral wildly out of control. Barring some unforeseen catastrophe, things are not going to return to the gloomy days of the 1980s because Ireland is a different place now and the employment spectrum has widened greatly.
A separate financial source agreed. “There was a prolonged period when many ordinary working people didn’t have to worry too much about money because employment was plentiful and borrowing was cheap. Generous discretionary income was commonplace but that was a false situation that was never going to last. Now it is time to start budgeting again and cutting our cloth to measure.
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The same is true for many employers whose level of profit has fallen but, if their structures were sound in the first place, their businesses should still be viable.”
Don’t be spooked
A second economist told The Munster Express it was a time for people to hold their nerve and not be spooked. “What the current situation means is that it is a buyers’ market out there at present giving good value to potential purchasers. But that is all it is and if anybody thinks family houses, cars and other high-priced items are going to come crashing down by ridiculous sums they are very, very wrong”, he added.
“In other words, if you are due to make a major purchase, whatever it may be, and you have your finance in place then go ahead and take advantage of the present climate”, he advised.
That said, interest rates have risen and families with high loan commitments are taking stock of their situation. Discretionary and retail spending, especially on luxury items, is being cut back as people circle the wagons and baton down the hatches.
Household costs have also risen, not least of which are fuel and heating, and it is likely they will continue to do so for some time. The world-price of commodities like wheat, corn and rice have risen for a variety of reasons beyond the influence of this country but various governments are taking steps in an attempt to redress the balance.