Quarterly Economic Commentary, Winter 2009

23/12/2009

Quarterly Economic Commentary, Winter 2009

Dr. Alan Barrett, Dr. Ide Kearney, Jean Goggin, Thomas Conefrey (ESRI). Some of the main findings of the analysis include the following:

• We now expect that the economy will contract by 10 percent on a GNP basis this year, or 7¼ percent in GDP terms.
• We expect to see a further contraction in the economy in 2010 but this contraction will be modest compared with 2009. We expect GNP to fall by 1½ percent in volume terms; for GDP, the corresponding decline is ¼ percent. This annual figure is based on output continuing to fall at the start of the year followed by a resumption of growth in the second half.
• Given positive developments in the international environment, exports are expected to grow next year at a rate of 1½ percent. However, domestic factors will act as a drag on growth. Private consumption is expected to fall by 1 percent, investment by 17½ percent and public consumption by 3 percent.
• It should be noted that although consumption is expected to fall, our forecasts include a modest reduction in the savings rate between 2009 and 2010, from 11½ percent to 10¾ per cent. This fall is included in the expectation that Budget 2010 will have boosted confidence, as will a slower pace of employment loss in 2010 relative to 2009.
• On employment, we expect a fall of 170,000 in 2009 and of 76,000 in 2010. Unemployment is forecast to average 11¾ percent this year and to peak at close to 14 percent in the latter part of 2010. We expect net outward migration to be 40,000 in the year ending April 2010.
• In our General Assessment, we discuss how Budget 2010 can be judged positively in terms of macro-fiscal management, even if some micro-dimensions are open to question. One such example is the exclusion of all pensions from cuts regardless of the wealth and incomes of those concerned.
• In spite of popular perceptions, analysis contained in the Commentary shows that Budget 2010 was not the most contractionary of modern times, largely due to the deflationary context in which the meaures were enacted.
• A further piece of analysis shows that while Budget 2010 was clearly regressive, the combination of Budgets 2009 and 2010 placed most of the burden of fiscal adjustment on higher earners.

Notes for Editors: 1. The Quarterly Economic Commentary, Winter 2009, by Alan Barrett, Ide Kearney, Jean Goggin and Thomas Conefrey (ESRI), is published on the ESRI website on Wednesday 23rd December at 00:01 a.m. 2. Members of the Media are invited to attend the Media Briefing to be held on Tuesday, 22nd December 2009 at 12 noon at The ESRI, Whitaker Square, Sir John Rogerson's Quay, Dublin 2. 3. This Quarterly Economic Commentary includes five Research Bulletin articles, i.e.

• "Junior Cycle Education: Insights from a Longitudinal Study of Students", Emer Smyth, ESRI Research Bulletin No. 09/4/1, December 2009.
• "Investing in Electricity Infrastructure and Renewables in Ireland", John Fitz Gerald, Seán Lyons, Laura Malaguzzi Valeri, ESRI Research Bulletin No. 09/4/2, December 2009.
• "Coping With Population Change In Ireland: The Implications For Healthcare", Richard Layte, ESRI Research Bulletin No. 09/4/3, December 2009.
• "The Irish ‘Health Basket’: An International Perspective", Samantha Smith, ESRI Research Bulletin No. 09/4/4, December 2009.
• "Identification Of Individuals At Risk Of Becoming Long-Term Unemployed", Philip J. O’Connell, Seamus McGuinness, Elish Kelly and John Walsh, ESRI Research Bulletin No 09/4/5, December 2009.

These articles are available to download from our website at https://www.esri.ie/publications/latest_publications/research_bulletins/ ?. Comments and queries relating to these articles should be sent directly to the authors.

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