Quarterly Economic Commentary, Summer 2009

Quarterly Economic Commentary, Summer 2009

16/7/09

Dr. Alan Barrett, Dr. Ide Kearney, Jean Goggin (ESRI). Some of the main findings of the analysis include the following: All of the Quarterly Economic Commentaries between Spring 2007 and Spring 2009 contained downward revisions to our forecasts, first for 2008 and then for 2009. For this reason, possibly the most noteworthy feature of this Commentary is that our forecast for GNP growth in 2009 is almost unchanged from the spring issue, at -8.9 per cent. For 2010, we now expect GNP to contract by 2.3 per cent. While this is a downward revision on our Spring forecast for 2010 (which was -1.2 per cent), the broad conclusion to be drawn is that the size of the recession is becoming clearer.  The contraction in the economy is expected to continue through this year and into next, with a very modest rate of growth now expected to emerge in mid-2010. By the end of 2010 GNP per head is expected to be lower than its value in 2002. Our forecast for unemployment in 2010 is now 16.1 per cent, down from 16.8 per cent in Spring. It should be stressed that this change does not result from a more favourable view on possible employment losses. Instead, we expect a faster fall in participation and also a higher rate of outward migration over the period of the forecasts. We now expect a net outflow of 40,000 in 2010, partly as a result of a sharp increase in unemployment among non-Irish nationals. In the General Assessment, we discuss how the likely extent of the downturn appears to be clearer now. While this is positive news in some respects, Ireland needs favourable outcomes in a number of areas if robust growth is to be restored beyond 2010. These include the global economic environment, the banking system, the public finances and competitiveness. In the case of each, concerns exist. For example, the objective behind NAMA of removing development related loans from the books of the banks is correct from the perspective of enabling banks to resume lending activities. However, there is no guarantee that such lending will result. Similarly, while progress has been achieved in restoring sustainability to the public finances, a huge amount of adjustment is still required. The challenge of restoring competitiveness in the context of a fixed exchange rate remains considerable.

Notes for Editors: 1. The Quarterly Economic Commentary, Summer 2009, by Dr. Alan Barrett, Dr. Ide Kearney, and Jean Goggin (ESRI), will be published online on Thursday 16th July 2009. Please note that the embargo will be until 00:01 a.m. Thursday 16th. 2. Members of the media are invited to attend a media briefing on Wednesday 15th July at 10.00 a.m. in the ESRI (Whitaker Square, Sir John Rogerson's Quay, Dublin 2). 3. This Quarterly Economic Commentary includes six Research Bulletin articles, i.e. "Improving Access to Primary Care in Ireland: do GP charges matter?" Layte, Richard, Nolan, Anne, ESRI Research Bulleting No. 09/2/1, June '09. "Assessing Vulnerability of Selected Sectors under Environmental Tax Reform" Fitz Gerald, John, Keeney, Mary, Scott, Sue, ESRI Research Bulletin No. 09/2/2, June '09. "Drinking Water Quality" Commins, Nicola, Lyons, Seán, Tol, Richard S. J., ESRI Research Bulletin No. 09/2/3, June '09. "Did Ireland become More Unequal during the Boom?" McGuinness, Seamus, McGinnity, Frances, O'Connell, Philip J., ESRI Research Bulletin No. 09/2/4, June '09. "Job Mobility in Ireland" Bergin, Adele, ESRI Research Bulletin No. 09/2/5, June '09. "What do We Know about Large Scale Immigration and Irish Schools?" Smyth, Emer, Darmody, Merike, McGinnity, Frances, Byrne, Delma, ESRI Research Bulletin No. 09/2/6, July '09. Comments and queries relating to individual articles can be sent directly to the authors (email details are on the first page of the article). For queries relating to the Research Bulletin, please email bulletin@esri.ie.

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