Quarterly Economic Commentary Spring 2010

13 April 2010

Quarterly Economic Commentary, Spring 2010

Some of the main findings of the analysis include the following:

• For 2010, we expect GNP to be essentially unchanged from its 2009 volume; the corresponding figure for GDP is ½ per cent less than in 2009.
• For 2011, we expect GNP to grow by 2¾ per cent and GDP to grow by 2½ per cent. While this return to growth is to be welcomed, it should be seen as a modest pace of growth.
• One reason for describing the 2011 growth forecast as modest relates to our expectation that employment will not grow between 2010 and 2011. Instead, we expect the number employed to average close to 1.9 million in both 2010 and 2011.
• In spite of the stability in the numbers employed, we expect unemployment to fall between 2010 and 2011, averaging 13¾ per cent in 2010 and 13 per cent in 2011. This expected fall in the rate of unemployment is related in part to expected migratory outflows – 60,000 in the year ending April 2010 and 40,000 in the year ending April 2011. We also expect to see on-going falls in labour force participation.
• In our analysis, we assume that the Government will implement its indicated budgetary package for 2011 where spending cuts and tax increases will amount to €3 billion. When combined with a return to modest growth and the consequent impact on revenues, we expect to see the General Government Deficit falling to 10¾ per cent of GDP in 2011, down from 12 per cent in 2010.
• Among a number of issues discussed in the General Assessment, we consider the banking crisis. We note that the recapitalisation needs of the Irish banks are now likely to be at least €33 billion, assuming that the State investment in Anglo Irish Bank ultimately amounts to €22 billion. In terms of net cost to the State, a figure of €25 billion is possible.
• We make two points in this context. First, this large addition to the national debt is manageable and in no way threatens the solvency of the State. Second, the situation should never have arisen whereby Irish taxpayers are faced with such a large financial burden due to the behaviour of the private sector.
• We also discuss the so-called Croke Park Deal and its potential benefits from a macroeconomic perspective.
• As a final note, we would like to point out that this issue of the QEC is dedicated to the founding editor, Terry Baker, who died on January 3 2010. Terry edited the Commentary for much of the 1980s and 1990s and was the public face of the ESRI for much of this period.

Note to Editors:

1. The Quarterly Economic Commentary, Spring 2010, by Alan Barrett, Ide Kearney, Jean Goggin and Thomas Conefrey (ESRI), will be published online on the ESRI website on Tuesday 13th April 2010 at 00:01a.m.

2. This Quarterly Economic Commentary includes four Research Bulletin articles, i.e. "Key Outcomes for Children: New Evidence from Growing Up in Ireland", by James Williams and Sheila Greene (TCD). "Is a Code of Practice Needed for the Grocery Trade", by Paul K. Gorecki. "Get Back in the Game: Sport, the Recession and Keeping People Active", by Pete Lunn. "The ESRI Environmental Accounts", by Sean Lyons and Richard S. J. Tol. "Identifying the Barriers to Higher Education Participation", by Selina McCoy, Delma Byrne. These articles are available to download from 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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