Quarterly Economic Commentary, Winter 2013

Quarterly Economic Commentary, Winter 2013, David Duffy, John FitzGerald, Kevin Timoney, David Byrne, ESRI, Dublin, 18/12/2013

 

Recovery in the domestic economy should contribute to economic growth of 2.0 per cent in GNP terms this year and growth of 2.7 per cent in 2014, according to the latest analysis in the ESRI Quarterly Economic Commentary.  Domestic demand is estimated to have grown by 0.9 per cent in 2013, the first increase in this aggregate since the crisis began. On top of this mild recovery in domestic demand, there is a continuing stimulus to the economy from the robust performance of the export sector. When taken together these developments underpin our forecast that GNP is likely to have grown by 2 per cent this year. In our view, the labour market is the most useful indicator as to what is happening in the Irish economy today – the Quarterly National Accounts do not give a true picture due to the ending of pharmaceutical patents. The third quarter figures for employment (and unemployment) were even better than those for the previous three quarters, which also involved substantial growth. Taking account of these data, we have revised upwards our estimate of employment growth in 2013 to 2.4 per cent and revised downwards our forecast for unemployment next year to 12 per cent of the labour force. It now looks likely that the government borrowing for 2013 will come in below target at around 7.1 per cent of GDP. While the Budget for 2014 was somewhat less stringent than we assumed in our last Commentary, it will, nonetheless, act as a drag on activity next year. However, the higher growth forecast for GNP in 2014 should also see an outperformance on the public finances, with the general government deficit coming in at around 4.4 per cent of GDP.

Note to Editors: 1. The Quarterly Economic Commentary, Winter 2013, by David Duffy, John FitzGerald, Kevin Timoney and David Byrne (ESRI), will be published online on the ESRI website on Wednesday 18 December. 2. This Quarterly Economic Commentary (QEC) includes the following Special Articles* and Research Note**:

  • "The Impact of Fiscal Policy on the Economy", by John FitzGerald, ESRI Research Note No. 2012/03/01, (to be published online 18/12/13).

*Articles are published in the QEC in order to foster high-quality debate on various aspects of the Irish economy and Irish economic policy. More. **Research Notes are short papers on focused research issues.