Bank crisis cost 'among most expensive'

Goodbody Stockbrokers has raised its forecast for Irish economic growth next year, though it still expects the economy to shrink by 1% this year. The stockbroker's latest forecast sees the economy growing by 2.8% in 2011, up from a previous forecast of 2.4%, due mainly to stronger exports.

Goodbody does not expect a recovery in domestic demand until next year, as job losses and lower wages affect consumer spending.The report also says that the cost to the State of the banking crisis will be among the most expensive of any developed economy.

Goodbody says recent banking measures will ensure a more stable banking system, but at an enormous cost of around €33 billion to the taxpayer. It says this figure amounted to 20% of economic output, 'significantly more' than it had previously estimated. The report says the average cost of banking crises in developed economies over the past 40 years was 11% of output.

The report, by economist Dermot O'Leary, says there is no sign yet of an improvement in the housing market. He expects 12,000 new homes to be built this year, falling to below 10,000 next year for the first time in more than 45 years. The report estimates that there are 287,000 vacant homes, a national average of 15%. But it says the figure for Greater Dublin is 10.7%, whereas for the Border counties it is almost 20%.