Quarterly Economic Commentary, Autumn 2009

13/10/2009

Quarterly Economic Commentary, Autumn 2009

Dr. Alan Barrett, Dr. Ide Kearney, Jean Goggin (ESRI) Some of the main findings of the analysis include the following: We expect GNP to fall by 8.7 percent in 2009 and by 1.7 percent in 2010. In GDP terms the corresponding figures are -7.2 percent for 2009 and -1.1 percent in 2010. Underlying these annual forecasts is a quarterly profile in which we expect growth to return in the latter part of 2010, although at a very modest pace. For 2010, we expect private consumption to fall by 2 percent, following an expected 7 percent fall in 2009. Investment is expected to contract by about 30 percent in 2009 and by 15 percent in 2010. The volume of public consumption is forecast to fall by 2 percent in each of 2009 and 2010. If the Government implements the €4 billion fiscal package for 2010, we estimate that this will be sufficient to stabilise the General Government Deficit but will not reduce it.  Our forecasts show a General Government Balance of -12.9 percent of GDP in 2009 and of -12.8 percent in 2010. The General Government Debt will reach 76 per cent of GDP in 2010. This figure does not include any increase in Government liabilities as a result of the operation of the National Asset Management Agency.  On employment, we are somewhat more optimistic now than when writing in July. We expect employment to average 1.85 million in 2010, up from 1.82 million in our Summer Commentary. We now expect the rate of unemployment to peak at close to 15 percent. In the General Assessment, we consider the question of whether savings of €4 billion is still the appropriate fiscal target for next year. We argue that it is and discuss how this might be achieved. While tax increases will have to form part of the Budget package, the balance of adjustment should be made on current expenditure. In the context of the McCarthy report, we argue against the proposal to cut welfare payments across the board by 5 percent. However, we suggest that a 20 percent cut in child benefit payments be implemented. We also see a need for further cuts in public sector pay.

Notes for Editors: 1. The Quarterly Economic Commentary, Autumn 2009, by Alan Barrett, Ide Kearney and Jean Goggin (ESRI), will be published online at 8.30 a.m. on Tuesday 13th October. 2. Members of the Media are invited to attend the Media Briefing which will take place at 8 a.m. on the 13th October, in the ESRI. Please note the embargo is until 8.30 a.m. Tuesday 13th October, and not 00:01 a.m., as is usual. 3. A paper on the QEC entitled "Macroeconomic Background to Budget 2010" will be presented at the ESRI's "Budget Perspectives 2010" Conference, to be held on Tuesday 13th October, 2009. For details on the Budget Conference please click here. 4. This Quarterly Economic Commentary includes four Research Bulletin articles, i.e. "Macroeconomic Differentials and Adjustment in the Euro Area" Siedschlag, Iulia, ESRI Research Bulletin No. 09/3/1, September 2009. "Europeanisation of Reference Groups?" Whelan, Christopher T., Maitre, Bertrand, ESRI Research Bulletin No. 09/3/2, September 2009.  "Investing in Education" Smyth, Emer, McCoy, Selina, ESRI Research Bulletin No. 09/3/3, September 2009.  "Reconciling Work and Family Life: Workplaces, Occupation and the Experience of Work-Life Conflict" Calvert, Emma, Russell, Helen, O'Connell, Philip J, McGinnity, Frances, ESRI Research Bulletin No. 09/3/4, September 2009. These articles are available to download from our website. Comments and queries relating to these articles should be sent directly to the authors. Click here to download these Research Bulletin articles and for the authors' contact details.

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