Irish Economy 2015: The Economic and Social Research Institute (ESRI) says today that "an expansionary budgetary policy is not advisable and does suggest that the government is adopting a pro-cyclical fiscal policy. While there was little alternative in the aftermath of the financial crisis to a contractionary, pro-cyclical fiscal policy, given the state of the public finances, it is regrettable now, once we have discretion in terms of the policy choices available, that such a course of action has been signalled."
The Government plans to add €1.5bn to the economy via tax cuts and spending rises in next October's Budget 2016.
Economic growth is expected to be strong in 2015 and 2016 and in the Quarterly Economic Commentary, Summer 2015, published today, the authors predict a growth in GNP of 4.2% in 2015 and of 3.6% in 2016. Declines in unemployment are also expected, with the headline rate envisaged to fall to 8.3% in 2016, down from 9.9% at present.
The forecast for housing completions to 13,000 and 15,000 units in 2015 and 2016 respectively compared with 93,000 in 2006.
Speaking about the report, Kieran McQuinn (ESRI) said “We continue to believe that the Irish economy will grow quite strongly in both 2015 and 2016. Notwithstanding the poorer than expected performance of both the US and UK economies in the first quarter of 2015, most domestic indicators, including taxation receipts, indicate that the recovery in economic performance is still very evident in the Irish economy.”
QEC co-author, David Duffy (ESRI) continued “We expect that the domestic economy will make a major contribution to growth in 2015 and 2016. Having updated our estimates we now expect the numbers of homeowners in negative equity to fall to approximately 160,000 by the end of this year and could fall to below 100,000 by the end of 2016.”
A research note, published with the QEC, re-examines the “pass-through” relationship between the European Central Bank (ECB) policy rate and the standard mortgage variable rate (SVR) charged by Irish credit institutions. The issue has attracted renewed interest in recent times owing to the continued observed difference between the SVR and the rate of interest charged on other variable rate mortgages in the Irish market.
© Copyright 2015 by Finfacts.ie