Quarterly Economic Commentary (Autumn 2002)

November 08, 2002

News

Quarterly Economic Commentary (Autumn 2002)

Daniel McCoy, David Duffy, Adele Bergin, John Eakins



Some of the main findings of the analysis include:

  • Output growth in the Irish economy is forecast to be 4.0 per cent in 2002 and 4.2 per cent in 2003 in real GDP terms. In real GNP terms growth is forecast to be 2.5 per cent in 2002 and 3.3 per cent in 2003. Irish growth prospects dependent upon a return to strong international growth, which remains uncertain in the short-term.
  • Inflation in consumer prices is forecast to average 4.7 per cent in 2002 and 4.0 per cent in 2003. The rate of unemployment is expected to average 4.5 per cent in 2002 and 4.8 per cent in 2003.
  • As the EU enlarges, the challenge for Ireland is to shape our economic model to embrace it and this makes it all the more necessary to control those competitiveness factors under domestic influence in the areas of wages, tax and productivity. Future social partnership frameworks must support competitiveness. Realism in terms of wage negotiation will be necessary on all sides if a new social partnership deal is worth having. Wage terms need to be flexible to reflect the changing context. Failure to move the wage bargaining process in this direction will make a future deal both less achievable and ultimately less desirable.
  • The forthcoming Budget 2003 will need to consolidate the public finances by bringing expenditure growth under control. The difficulties in forecasting government revenues arising from factors other than uncertainty about economic growth have increased in recent years, a reflection of both the substantial tax rate changes and significant administrative changes undertaken. In this regard it may be appropriate to allow time to analyse the economic impact of the modifications already in train before further substantial budgetary changes are undertaken in the Budget.
  • The general government balance, used for our international commitments under the EU Stability and Growth Pact, will move to a deficit of 1 per cent of GDP in 2003. While well below the constraints of the Pact this significantly reduces the desirable safety margin to avoid breaches if economic activity turns out to be significantly lower than anticipated.