Quarterly Economic Commentary, Spring 2005

March 23, 2005

News

23/03/2005

 

Quarterly Economic Commentary, Spring 2005

By Daniel McCoy, David Duffy, Adele Bergin, Shane Garrett, Yvonne McCarthy

Embargo: Wednesday, March 23rd, 2005 at 00.01a.m.



Some of the main findings of the analysis include:

 

 

  • The Irish economy has resumed on to a relatively strong growth path with rates of 5.7% in real GDP and 5.0% for real GNP forecast for 2005, followed by rates of 5.5% and 5.8% respectively in 2006. Following an exceptional strong employment growth of 3% last year labour market conditions are expected to remain strong both this year and next. We forecast that the unemployment rate will stabilise to average 4.3% in both 2005 and 2006.
  • Inflation in consumer prices is expected to average 2.3 per cent and 2.2 per cent in 2005 and 2006 respectively. Wage growth is expected to moderate to an average of 4.7 per cent next year, down from a forecast 5.2 per cent in 2005, which is broadly in line with trends in expected consumer price inflation and productivity developments.
  • Productivity growth in the Irish economy has slowed substantially from the boom years of the 1990s. While Irish productivity per hour rates remain high within an international context, it will be important for future living standards to ensure that they continue to improve. It should be an imperative to ensure that best use is made of the expanding workforce. The substantial inflow of migrants to the labour force, whose educational attainments are relatively high compared to the norm, would appear to be currently employed in occupations that may not best reflect their skills. This constitutes a significant loss to the Irish economy from what are currently very favourable migratory trends.
  • The public finances remain in a strong and sustainable position. The presence of substantial one-off factors from increased revenues resulting from tax investigations and expenditure contingencies related to the uncertain costs of re-imbursement of long-term care patients is expected to move the General Government Balance from a surplus of 1.3 per cent of GDP in 2004 to forecast deficits of 0.6 per cent in 2005 and 0.2 per cent in 2006.