In Business
Quarterly Economic Commentary - ESRI
By Dr. Alan Barrett, Dr. Ide Kearney & Jean Goggin, ESRI
Sep 1, 2009 - 10:06:03 AM

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.

For further information please contact:
Dr. Alan Barrett ESRI - 01 8632112;
Jean Goggin ESRI - 01 8632097.