Quarterly Economic Commentary, Winter 2010

20/01/2011

Quarterly Economic Commentary, Winter 2010

Prof. Alan Barrett, Dr Ide Kearney, Thomas Conefrey and Cormac O'Sullivan (ESRI). Some of the main findings of the analysis include the following: The forecasts in this Commentary see GDP growing by 1 ½ per cent in real terms in 2011 and by 2 ¼ per cent in 2012. The corresponding figures for GNP are ¼ per cent in 2011 and 1 ½ per cent in 2012. Exports are forecast to grow by 6 per cent in 2011 and by 5 per cent in 2012. By contrast, consumption is expected to fall by ¾ per cent in 2011 and by a further ½ per cent in 2012. On-going uncertainty with respect to job stability, wages and taxation are likely to act against any rebound in consumption spending over the forecast horizon. We see the banking crisis as being a key factor in the continued depressed level of both consumption and investment through an absence of affordable credit. Our GDP and GNP growth forecasts are lower than the corresponding forecasts which underpinned Budget 2011. As a result, we see the ratio of general government debt to GDP reaching 104.5 per cent in 2012, as compared to 102 per cent which is the forecast figure in Budget 2011. Given the uncertainties surrounding all forecasts, we would not place too great an emphasis on the difference. Instead, we take it as being an on-going indicator of the challenges which are faced in restoring the public finances to a sustainable path. We expect the general government deficit to be 9.6 per cent of GDP in 2011 and 7.8 per cent in 2012. While our forecasts envisage positive growth in both GNP and GDP for the first time since 2007, the rates of growth are still slow. For 2011, we see the growth in GNP and GDP being accompanied by continued employment falls as output growth is achieved through productivity growth. Employment is expected to average 1.83 million in 2011, down 1 ¼ per cent on the 2010 number. We do expect employment growth in 2012 but at just 5,000, this is tiny relative to the labour force. The rate of unemployment is expected to average 13 ½ per cent in 2011 and 13 per cent in 2012. Net outward migration is forecast to be 100,000 over the two year period April 2010 to April 2012. The highest rate of net outflow in the 1980s occurred in 1989 when the rate reached 44,000. Hence, our forecast for an average annual net outflow of 50,000 is high in historic terms, albeit against a larger population base. In our General Assessment we discuss how our forecasts compare to those in Budget 2011. We also make a brief comment on Budget 2011 in which we express some disappointment that the tax measures were so heavily focused on income as opposed to the implementation of taxes or charges that might be expected to impact less on economic activity such as property taxes. We note the on-going concerns surrounding the debt crisis in the eurozone and how this situation gives rise to uncertainty in the context of forecasting.

Note to Editors: 1. The Quarterly Economic Commentary, Winter 2010, by Alan Barrett, Ide Kearney, Thomas Conefrey and Cormac O'Sullivan (ESRI), will be published online at 00:01 a.m. on Thursday 20 January. Please note that the embargo will be until 00.01 a.m. Thursday 20 January. 2. This Quarterly Economic Commentary includes the following Research Bulletin articles:

• "A Good News Story About Irish Health Care", Layte, Richard, ESRI Research Bulletin No. 2010/04/01.

• "On International Equity Weights and National Decision Making on Climate Change", Anthoff, David, Tol, Richard S J, ESRI Research Bulletin No. 2010/04/02.
• "Progression in Higher Education: The Value of Multi-Variate Analysis", McCoy, Selina, Byrne, Delma (National University of Ireland, Maynooth), ESRI Research Bulletin No. 2010/04/03.
• "Cultural Differences in Parenting Practices", Murray, Aisling, ESRI Research Bulletin No. 2010/04/04.
• "Public and Private Utilisation of In-Patient Beds in Irish Acute Public Hospitals" O'Reilly, Jacqueline, Wiley, Miriam M, ESRI Research Bulletin No. 2010/04/05.

Link to publication details