Quarterly Economic Commentary, Autumn 2011
Media Release on t'he Quarterly Economic Commentary, Autumn 2011', by Joseph Durkan, David Duffy and Cormac O'Sullivan (ESRI), published online on the ESRI website at 00:01 a.m. Wednesday 30 November 2011.
30/11/2011
Quarterly Economic Commentary, Autumn 2011
The financial crisis currently gripping the eurozone, coupled with tightening fiscal policy across the region, are likely to send the eurozone back into recession. As one of the world’s largest and most financially integrated economies, this will have adverse implications for the global economy. Against such headwinds, Ireland’s road to recovery will become much more difficult, dependent as it is on export-led growth. In the near-future we should be able to continue to meet our fiscal targets, but it will become harder to do so as the external environment becomes increasingly unfavourable. With few policy tools left, competitiveness gains already achieved must be strengthened through structural reforms.
- GDP will increase by 2.2 per cent in 2011, and GNP will increase by 1.2 per cent. Given the external environment, growth will slow significantly next year. GDP in 2012 will grow by 0.9 per cent, whereas GNP will contract by 0.3 per cent as export growth will not be enough to counterbalance weak domestic demand and government austerity.
- Exports are forecast to grow by 6 per cent this year, but with external demand expected to be weak next year, we have reduced our forecast for 2012 to 4.7 per cent.
- The ongoing fiscal consolidation and lower export demand will combine to decrease disposable incomes this year and next. The savings rate is expected to remain elevated as some households continue to hold precautionary savings, while others continue the process of deleveraging. Consequently, consumption is expected to fall this year by 1.8 per cent and again in 2012 by 1.5 per cent.
- Investment is also expected to continue to fall due to spare capacity left over from the boom years. Furthermore, the uncertainty created by the eurozone crisis is likely to delay major investment decisions. Investment is expected to fall by 7.8 per cent this year and 2.3 per cent in 2012.
- Ongoing fiscal austerity will mean that government expenditure will fall by 3 per cent this year and a further 4 per cent next year. We believe the government is likely to hit the fiscal targets for this year and next. However, the longer the eurozone crisis continues, the harder it will be to hit targets in the future.
Note to Editors: 1. The Quarterly Economic Commentary, Autumn 2011, by Joseph Durkan, David Duffy and Cormac O'Sullivan (ESRI), will be published online on the ESRI website at 00:01 a.m. Wednesday 30 November 2011. 2. The embargo is until 00:01 a.m. Wednesday 30th November 2011. 3. Members of the media are invited to attend the media briefing to be held on Tuesday 29th November 2011 at 10.30 a.m. at The ESRI, Whitaker Square, Sir John Rogerson's Quay, Dublin 2. 4. This Quarterly Economic Commentary includes the Special Article "User Cost and Irish House Prices", by David Duffy, which will be published on 30/11/2011. The article "Irish Government Debt and Implied Debt Dynamics: 2011-2015" by John FitzGerald and Ide Kearney was already published on 6/09/2011 and is included in this QEC. 5. This Quarterly Economic Commentary includes the following four Research Bulletin articles:
- "Selling State Assets: Three Options" Paul K. Gorecki and Richard S.J. Tol, ESRI Research Bulletin No. 2011/3/1.
- "Parents, Children and Sense of Control" Dorothy Watson, ESRI Research Bulletin No. 2011/3/2.
- "The Effects of the Euro on Intra-Euro Area Exports" Gavin Murphy and Iulia Siedschlag, ESRI Research Bulletin No. 2011/3/3.
- "What Has Happened to Marginal Tax Rates?" Tim Callan, Niamh Crilly, Claire Keane and John R. Walsh, ESRI Research Bulletin No. 2011/3/4.
These articles (when published) are available to download from our website, 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).