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Quarterly Economic Commentary, Spring 2008

Dr. Alan Barrett, Dr. Ide Kearney, Martin O’Brien (ESRI)

Some of the main findings of the analysis include:

• We expect GNP to grow by 1.6 percent this year. This would be the slowest pace of GNP growth since 1988. The downturn in house building is the main reason for the slow pace of growth. However, more recent developments such as the slowdown in the United States and the appreciation of the euro are now adding to the negative set of factors facing the economy in 2008.
• As a result of the slow pace of growth in 2008, we now expect no employment growth in 2008. We expect the unemployment rate to reach 6 percent and the rate of net inward migration to slow to 20,000.
• As regards the public finances, our estimates suggest that the Exchequer deficit will top €5 billion in 2008. The General Government deficit is expected to reach 1.2 percent on GDP.
• For 2009, we expect a modest recovery and foresee GNP growth of 3 percent. The biggest single difference between 2008 and 2009 is expected to be the rate at which house building slows. By 2009, much of the slowdown will have been experienced and house-building will be closer to its long-run sustainable level.
• Employment growth should resume in 2009 and we expect to see an extra 24,000 net jobs created. However, the rate of unemployment will continue to edge upwards.
• The public finances are expected to deteriorate further in 2009. We foresee the Exchequer deficit rising above €7 billion and the General Government deficit reaching 2 percent on GDP.

In our overall assessment of the economy, we look at two issues:

• The public finances appear to be in a downward trajectory and it will be difficult for the Government to halt the increasing deficits in 2009. Although a slower pace of current spending growth may be achieved in 2008 relative to 2007, it may be difficult to sustain this in 2009 as the economy recovers and expectations change.
• Much of our forecast for growth in 2009 is based on the expectation that services exports will continue to grow strongly, as they have done in recent years. However, data on this sector (and hence analysis) is less well developed than we would like. This means that we can be less confident on the accuracy of our forecasts for this sector. If we are overly optimistic for services exports, then we are overly optimistic for the economy too.

For further information contact:

Dr. Alan Barrett, ESRI, on (353-1) 8632112 (office), or 
Martin O’Brien, ESRI, on (353-1) 8632095 (office).

Special Article

There is one Special Article in this Quarterly Economic Commentary, as follows:

"The Decline of the Computer Hardware Sector: How Ireland Adjusted", by Professor Frank Barry (Trinity College Dublin) and Dr. Chris Van Egeraat (NUI Maynooth)

Link to publication