Quarterly Economic Commentary, Autumn 2010

21/10/2010

Quarterly Economic Commentary, Autumn 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:

• We expect that GNP will contract by 1½ per cent this year. For GDP, we expect a decline of ¼ per cent. For 2011, we expect GNP to grow by 2 per cent and for GDP to grow by 2¼ per cent.
• We expect that employment will average 1.86 million this year, down 68,000 from 2009, a fall of 3½ per cent. We expect the rate of unemployment to average 13¼  per  cent. For 2011, we expect the number employed to average 1.85 million and the rate of unemployment to average 13½  per cent.
• In the year ending April 2010, the CSO recorded net outward migration to have been 34,500. This was well below our forecast of 70,000. We discuss how this figure of 34,500 seems to be a conservative estimate of the rate of outflow when compared with estimates of migration contained in another CSO publication, namely, the Quarterly National Household Survey. We expect the net outflow in the year ending April 2011 to be 60,000. This is an increase of 10,000 on our earlier forecast for the year ending April 2011.
• The General Government Deficit is expected to be 31 per cent of GDP this year, a truly dramatic figure. Of course, almost two-thirds of this is a one-off extraordinary item related to the banking bailout. For 2011, we expect the deficit to be 10 per cent of GDP, based on a budgetary package of €4 billion in savings.
• In our General Assessment, we look at the budgetary challenges facing the country and in particular at the prospects of bringing the deficit down to sustainable levels in a reasonable timeframe. Using the “Low Growth” profile as published by the ESRI in July 2010, we assess what level of savings will be required to achieve a deficit of 3% by 2014. Our calculations suggest that savings of up to €15 billion could be needed, i.e., twice the sum that was under discussion at the time Ireland and the Commission agreed to the 2014 deadline.
• We express a concern over the potential negative impact on the economy of this scale of adjustment over this period of time.
• While the 2014 date strikes us as worryingly ambitious, we are mindful that an extension is highly unlikely and so we must operate within the constraints as presented. Although we have based our forecasts on a budgetary package of €4 billion of savings, it could well be that a higher amount will be sought. Whatever it is, the scale of the task is such that there will be a need for adjustments in current and capital spending and in taxation.

Note to Editors: 1. The Quarterly Economic Commentary, Autumn 2010, by Prof Alan Barrett, Dr Ide Kearney, Thomas Conefrey and Cormac O'Sullivan (ESRI), will be published online at 00:01 a.m. on Thursday 21 October. 2. A Media Briefing will take place at 10 a.m. on Wednesday 20 October, in the ESRI. Please note that the embargo is until 00.01 a.m. Thursday 21 October. 3. This Quarterly Economic Commentary includes the following Research Bulletin articles:

• "Resource Allocation, Financing and Sustainability in the Health Sector", Aoife Brick, Anne Nolan, Jacqueline O’Reilly, Samantha Smith.
• "International Transmission of Business Cycles", Iulia Siedschlag.
• "The Impact of Social Partnership on Ireland’s Competitiveness", by Seamus McGuinness, Elish Kelly and Philip J. O’Connell.
• "Commuting Behaviour and Car Ownership in Ireland", Anne Nolan.
• "Providing Quality Pharmacy Services: Good Intentions Are Not Enough", Paul K Gorecki

These articles are available to download from our website at https://www.esri.ie/publications/latest_publications/research_bulletins/. Comments and queries relating to these articles should be sent directly to the authors. Ends

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