Quarterly Economic Commentary, Autumn 2013

October 09, 2013

News
Macroeconomics
See Publication
The Irish economy could grow by around 2.0 per cent in GNP terms this year, according to the latest analysis in the ESRI Quarterly Economic Commentary.

Understanding the pattern of growth in the Irish economy is very difficult this year. Many of the key indicators that one would normally rely on are affected by special factors. In particular, the data for industrial output, exports and, hence, GDP, are driven by an exceptional fall in the profitability of the pharmaceutical sector associated with the “patent cliff”. In explaining the current trends in the Irish economy we concentrate on GNP as a measure of economic welfare, since it is largely unaffected by these special factors. The clearest signal of what is happening in the economy this year is the growth in employment. The message from the employment numbers is reinforced by the fall in the Live Register, which has continued in the third quarter of 2013. These statistics, and a detailed examination of what lies behind all the other indicators, underpin our forecast of 2 per cent growth in GNP this year. Growth next year will depend on what happens outside Ireland. Here we rely on the current forecasts for the Eurozone economy suggesting a return to significant growth, leading to growth of around 2.7 per cent for GNP in the Irish economy. We anticipate that the public finances this year will come in ahead of target, with borrowing at around 7 per cent of GDP (the relevant measure for the public finance targets). We continue to hold our view that the most prudent course of action in the 2014 Budget is to implement a fiscal adjustment amounting to €3.1 billion. On this basis, we expect that borrowing next year will be just under 4.5 per cent of GDP, significantly below the target set in the medium-term economic strategy.

Note to Editors: 1. The Quarterly Economic Commentary, Autumn 2013, by David Duffy, John FitzGerald, Kevin Timoney and David Byrne (ESRI), will be published online on the ESRI website on Wednesday 9 October. 2. This Quarterly Economic Commentary (QEC) includes the following Research Notes*:

*Research Notes are short papers on focused research issues.