Quarterly Economic Commentary, Winter 2011/Spring 2012

24 February 2012

Quarterly Economic Commentary, Winter 2011/Spring 2012

 There is still uncertainty regarding the outlook for the euro zone. Our forecasts for Ireland are based on a European outlook where the euro zone will continue to “muddle-through” the crisis, with current levels of uncertainty about debt sustainability persisting during the first half of 2012. A key factor will be the reaction of the private sector to this policy uncertainty. We estimate that the Irish economy returned to modest growth in 2011, with real GDP increasing by about 0.9 per cent. However, employment has continued to fall and as a consequence the unemployment rate averaged 14.2 per cent. We expect a similar rate of growth in 2012 (0.9 per cent in real GDP). The unemployment rate will more or less stabilise, at 14.0 per cent, both because of migration and because of a reduced participation rate. This Commentary presents our first forecast for 2013. As a consequence of the weak international and domestic environment, GDP and GNP are forecast to increase by 2.3 per cent and 1.0 per cent respectively in 2013. Unemployment will remain high at 13.7 per cent. While the austerity measures currently being undertaken correct the public finances they have a dampening effect on economic activity. There are very few policy options open to the government to stimulate growth. Structural reforms could be the mechanism to improve the productive capacity of the economy along with reforms of the tax system and infrastructural improvements.

Note to Editors: 1. The Quarterly Economic Commentary, Winter 2011/Spring 2012, by David Duffy, Joseph Durkan and Cormac O'Sullivan (ESRI), will be published online on the ESRI website at 00:01 a.m. Friday 24th February 2012. 2. The embargo is until 00:01 a.m. Friday 24th February. 3. Members of the media are invited to attend the media briefing to be held on Thursday 23rd February at 10.30 a.m. at The ESRI, Whitaker Square, Sir John Rogerson's Quay, Dublin 2. 4. This Quarterly Economic Commentary includes a Special Article entitled "Distributional Impact of Tax, Welfare and Public Sector Pay Policies: 2009-2012" by Tim Callan, Claire Keane, Michael Savage and John R. Walsh, which will be published online on Friday 24th February. An embargoed media release will be issued in advance of publication. 5. This Quarterly Economic Commentary includes the following two Research Bulletin articles:

• "What Determines the Diffusion of ICT at Firm Level?" Stefanie Haller and Iulia Siedschlag, ESRI Research Bulletin No. 2012/1/1.
• A Statistical Analysis of Households and Families in Ireland". Pete Lunn, ESRI Research Bulletin No. 2012/1/2.

These articles will be available to download from our website on Friday 24th February, and copies will be available at the QEC media briefing. Comments and queries relating to these articles should be sent directly to the authors of the papers. (Bulletin Articles are designed to be easily accessible to a wide readership. A reference or references to the full publication is included at the end of each Bulletin article, as is the contact email address of the authors). 

Link to QEC publication details