Quarterly Economic Commentary Summer 2006
Quarterly Economic Commentary Summer 2006
Dr. Alan Barrett, Dr. Ide Kearney, Yvonne McCarthy Some of the main findings of the analysis include:
- Strong economic growth will continue in 2006 with both GNP and GDP forecast to grow by 5.6 per cent in 2006. For 2007, we are forecasting GNP growth of 5.1 per cent and 5.2 per cent for GDP.
- Consumption is expected to continue to grow strongly over the forecast horizon, driven by a very robust labour market, healthy incomes growth and a contribution from the maturing of the SSIAs.
- Investment demand will also remain strong with growth rates forecast of 8.3 per cent in 2006 and 6.5 per cent in 2007.
- We also expect to see an acceleration in the pace of government spending growth in the run up to the election.
- In contract to the domestic sources of demand, net exports will make a negative contribution to GNP growth, with imports growing more strongly than exports.
- We expect employment increases of 85,000 in 2006 and 74,000 in 2007. These increases imply a continuing strong rate of immigration with gross inflows forecast of 69,000 in 2006 and 62,000 in 2007.
- On inflation, we expect increases in the CPI to average 3.8 for the year, implying rates of over 4 percent for the remainder of the year. Inflation should ease next year partly because of fewer interest rate increases.
While the picture emerging for the remainder of 2006 and 2007 is bright, a number of trends and prospects point to slower growth beyond the forecast horizon of the QEC. This leads the authors to include the following cautionary note: “Low productivity growth, an increasing balance of payments deficit, an over-reliance on construction and the end to the maturing of the SSIAs all point to poorer prospects in 2008 and beyond”. So although the headline numbers look good for 2006 and 2007, the authors believe that more challenging times lie ahead. Quarterly Economic Commentary Summer 2006