Latest ESRI forecast predicts strong GDP growth in 2015 to continue into 2016

Economic growth is expected to be strong in 2015 and 2016, with Ireland's Gross Domestic Product (GDP) forecast to grow by approximately 6.7 per cent in 2015 and 4.8 per cent in 2016, according to the latest analysis by researchers at the Economic and Social Research Institute (ESRI).

Given the volatility exhibited by the national accounts, the authors also note that GNP is set to grow by 5.2 per cent in 2015 and by 5.3 per cent in 2016.

In the Quarterly Economic Commentary, Winter 2015, published today (Friday, 18 December 2015), growth in GDP of 6.7 per cent in 2015 and of 4.8 per cent in 2016 is predicted. Declines in unemployment are also expected, with the headline rate envisaged to fall to 7.9 per cent by the end of 2016.

Speaking about the report, Kieran McQuinn (ESRI) said “While the national accounts have experienced a significant degree of volatility in 2015 with trends in patents and aircraft leasing having a particular impact, it is important to acknowledge that the economy has experienced real and significant growth in 2015. We expect this to continue into 2016.”

Co-editor David Duffy (ESRI) said that “While the pace of economic growth has increased, we identify issues in the housing market and a potential significant downturn in global trade in 2016 as downside risks to our forecasts.”

Housing Supply

A Special Article, also published in the QEC Winter 2015 provides some insights into the role of government policies in stimulating housing supply.

A Review of Housing Supply Policies, by Ciara Morley, David Duffy and Kieran McQuinn (ESRI), examines international and domestic housing policies, and highlights the myriad of governmental approaches used to tackle the issue of housing supply. While non-policy constraints, such as geography may contribute to a lag in new residential construction, the literature identifies that government policy plays a strong role in housing supply responsiveness.

Commenting on the Note, Ciara Morley, a co-author, said “From our analysis, policies such as strict planning regulations, substantial infrastructural costs and inappropriate taxation appear to play an important role in acting as a constraint on housing supply. There is however some scope, from an Irish perspective, for government policy reform to encourage new housing developments, bearing in mind that likely future demographic trends call for 25,000 residential units per annum over the coming years.

Dr. Morley continued, “For example, NAMA’s Residential Funding Programme 2016-2020 should go some way to alleviating financing pressures on smaller construction firms and help prevent extended delays in the commencement of developments. In addition to this, from a taxation point of view, evidence from countries such as Denmark shows that the introduction of a land tax that increases in line with house/land prices is shown to act as an incentive to sell/use underdeveloped or vacant land in periods of increased demand. This is something that could be looked at in greater detail in an Irish context. In any case, this review highlights the importance of understanding both supply and demand side features of the housing market before implementing any such policies.”

Ends

For further information please contact:

Kieran McQuinn (Associate Research Professor, ESRI), kieran.mcquinn@esri.ie