Quarterly Economic Commentary, Winter 2005

January 31, 2006

31/01/2006

Dr. Alan Barrett, Dr. Ide Kearney, Shane Garrett, Yvonne McCarthy

Some of the main findings of the analysis include:

Strong economic growth will continue in 2006 with GNP forecast to grow by 4.8 per cent and GDP forecast to grow by 4.7 per cent.
Consumption is forecast to be the main driver of economic growth in 2006, with an increase of 5.6 per cent projected.
Exports are forecast to show a recovery on the weak performance of 2005. However, the growth in Ireland’s exports is forecast to be below the growth in world exports. This suggests that Ireland’s share in world trade will decline in 2006, thereby continuing a trend that began in 2002. This will contribute to a widening in the balance of payments deficit.

In the run-in to the partnership talks, the authors make the following recommendations:

For the private sector, the talks should provide for the maximum degree of wage flexibility. It is not possible to predict how markets will evolve across different sectors of the economy and so flexibility is the key requirement.
For the public sector, wage increases should be limited and should not exceed increases in the private sector. We say this for a number of reasons. First, research published in the Commentary in 2004 showed public sector employees earning more than those in the private sector. Second, increases in the public sector have generally exceeded those in the private sector since 2004. While there is a need to recruit top quality people into the public sector, this must be balanced by the need to control the public sector pay bill on behalf of taxpayers. We argue that the pay bill can be contained without risking recruitment difficulties.

A Press Briefing will be held at the ESRI on Monday January 30th 2006 at 11:00am.