| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News


Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News




Content Management by interactivetools.com.

News : Global Economy Last Updated: Apr 12, 2011 - 7:41 AM

IMF cuts Irish GDP 2011 growth forecast in half; Says global economic recovery gaining strength
By Finfacts Team
Apr 11, 2011 - 3:51 PM

Email this article
 Printer friendly page
Source: IMF

The International Monetary Fund (IMF) has cut its Irish GDP (gross domestic product) growth forecast in half and sees growth in 2011 at 0.5%, compared with a forecast of around 1% late last year. It says the global economic recovery is gaining strength, with world growth projected at about 4½% in both 2011 and 2012, but unemployment remains high, and risks of overheating are building in emerging market economies.

IMF economists in the bi-annual World Economic Outlook, say a decision on changing the interest rates charged to countries under the EU's bailout rules is 'urgently needed'.

The IMF says that Ireland's unemployment rate will average 14.5% this year, falling to 13.3% in 2012. Inflation in Ireland is forecast to be 0.5%, compared with a Eurozone average of 2.3%.

Earlier Monday, the Bank of Ireland said the past month has thrown up two surprising and unwelcome data releases in Ireland. The first was that the unemployment rate over the past six months has been much higher than previously published, on the basis that the labour force stopped falling in the final quarter of 2010. This in turn implies that the scale of net emigration of late is much lower than previously thought, contrary to popular belief. The bank says it is doubtful whether this marks a clear break in the previous trend but the near-term impact is that the unemployment rate in 2011 is now expected to average 14.4% from 13.6% last year, albeit having probably peaked in recent months. BoI said the second data release showed that nominal GDP was deemed to have fallen by a massive 6.6% in just three months. The decline in real GDP was also a substantial 1.6%, driven by falling exports, contrary to the trend over the rest of the year.

As a result, the economy entered 2011 in a weaker state than most expected and as a consequence BoI also revised down its GDP growth forecast for the year to a modest 0.5%, in line with the latest consensus.

In the Bank of Ireland’s Quarterly Economic Outlook published today, Dr. Dan McLaughlin, group chief economist said: “The Irish labour market has been characterised by falling employment and a contracting labour force for the past three years but that pattern was partially arrested in the final quarter of 2010, as revealed in the Quarterly National Household Survey. The data showed that the labour force was broadly unchanged in the quarter when seasonally adjusted, in turn implying that the pace of net emigration had slowed appreciably, which is at variance with the widely held popular view that there is a substantial outflow of Irish nationals. Employment continued to fall, however, by 16,000 or 0.9%, with the result that the total unemployed jumped to 315,000 from 290,000 in the previous quarter, pushing the unemployment rate up to 14.7% from 13.7%. This was substantially higher than the previously published monthly estimates, (averaging 13.6% in Q4), with significant knock-on effects on the subsequent monthly data and on forecasts for this year as a whole."


The global economic recovery is gaining strength, with world growth projected at about 4½% in both 2011 and 2012, but unemployment remains high, and risks of overheating are building in emerging market economies, the IMF said in its latest forecast.

High commodity prices present new policy challenges, while old challenges --  fiscal and financial repair and reform and the rebalancing of global demand–remain work in progress.

“Given the improvement in financial markets, buoyant activity in many emerging and developing economies, and growing confidence in advanced economies, economic prospects for 2011–12 are good,” the IMF said in its April 2011 World Economic Outlook (WEO). However, disruptions to oil supply pose new risks to the recovery.

“Fears have turned to commodity prices,” said Olivier Blanchard, chief economist at the IMF. “Commodity prices have increased more than expected, reflecting a combination of strong demand growth and a number of supply shocks. These increases conjure the specter of 1970s-style stagflation, but they appear unlikely to derail the recovery,” he told a press conference in Washington.

Financial conditions fragile

Real GDP in advanced economies and emerging and developing economies is expected to expand by about 2½% and 6½%, respectively.

In the report released on April 11, it said financial conditions continue to improve after the global crisis, although they remain unusually fragile.

In many emerging market economies, demand is robust and overheating is a growing policy concern. Developing economies, particularly in sub-Saharan Africa, have also resumed fast and sustainable growth. But the IMF said new risks have emerged:

  • Rising food and commodity prices pose a threat to poor households, adding to social and economic tensions, notably in the Middle East and North Africa.

  • Oil prices have shot up because of unrest in the Middle East. The WEO said disruptions so far would have only mild effects on economic activity but, given falling spare oil production capacity, risks are on the downside.

  • The IMF said that the earthquake and tsunami in Japan had exacted a terrible human toll but that its global macroeconomic impact would be limited.

Many old challenges unaddressed

The IMF said many old policy challenges remain unaddressed even as new ones arise. In advanced economies, weak sovereign balance sheets and still-moribund real estate markets continue to present major concerns, especially in certain euro area economies.

Strengthening the recovery in advanced economies will require keeping interest rates low as long as wage pressures are subdued, inflation expectations are well anchored, and bank credit is sluggish. At the same time, public spending needs to be placed on a sustainable medium-term path by implementing fiscal consolidation plans and entitlement reforms, supported by stronger fiscal rules and institutions.

The WEO said this is particularly urgent in the United States to stem the risk of globally destabilizing changes in bond markets. “To make a sizable dent in the projected medium-term deficits, broader measures such as Social Security and tax reforms will be essential. “

It said that in Japan, the immediate budgetary priority was to support reconstruction. Once reconstruction efforts are under way and the size of the damage is better understood, attention should turn to linking reconstruction spending to a clear fiscal strategy for bringing down the public debt ratio over the medium term.

In the Eurozone, despite significant progress, markets remain apprehensive about the prospects of countries under market pressure. For them what is needed at the Eurozone level is sufficient, low-cost, and flexible funding to support strong fiscal adjustment, bank restructuring, and reforms to promote competitiveness and growth. More generally, the IMF says greater trust needs to be reestablished in Eurozone banks through ambitious stress tests and restructuring and recapitalization programs.

CNBC: IMF Upbeat on Global Economy:

Overheating concerns

The IMF said the challenge for many emerging and some developing economies is to ensure that present boom-like conditions do not develop into overheating over the coming year. Inflation pressure is likely to build further as growing production comes up against capacity constraints, with large food and energy price increases raising pressure for higher wages. The WEO published a chart showing countries in the Group of Twenty (G-20) with signs of overheating).

Source: IMF

Real interest rates are still low and fiscal policies appreciably more accommodative than before the crisis. Appropriate action differs across economies, depending on their cyclical and external conditions. However, a tightening of macroeconomic policies is needed in many emerging markets. Many emerging and developing economies will need to provide well-targeted support for poor households that struggle with high food prices, the IMF said.

The IMF said over the medium term, greater progress in advancing global demand rebalancing is essential to put the recovery on a stronger footing. This is will require action by many countries, notably fiscal adjustment in key economies with external deficits, and greater exchange rate flexibility and structural reforms that eliminate distortions and boost savings in key surplus economies.

Related Articles
Related Articles

© Copyright 2011 by Finfacts.com

Top of Page

Global Economy
Latest Headlines
Strong Swiss franc gloom deepens for exporters
Global investors shift focus to China; EM outflows surge to $1tn in 13 months
Global oil glut will continue into 2016
Stable growth momentum in OECD area but slowing expected in China
Prices for major food commodities in July lowest since September 2009
Global manufacturing in July weakest level in two years
US, China and UK lead top 25 target countries for foreign direct investment
Budget surpluses rare in developed countries from 1980s; Italy, France, Greece had none in 60 and 40 years
Singapore, London and Shanghai top cities for new FDI projects in 2014; Dublin in 11th place
Exchange rates shuffle as Dublin ranked 49th most expensive city; Paris at 46; Berlin at 105
Western consumer groups under pressure in China and India
Developing countries facing “structural slowdown” likely to last for years
OECD BEPS Tax Project: Amazon books UK sales in UK; Australia proposes up to 100% in penalties
Emerging Markets Index falls to 12-month low in May as manufacturing contracts
US and world economies slowing in 2015 — OECD
Global manufacturing production rose slightly in May; Trade flows weak
GDP growth in OECD area slowed to 0.3% in the first quarter of 2015
Only one quarter of workers worldwide have stable employment contracts
Automatic Exchange of Tax Information: OECD says countries won't be able to game system
Gates Foundation loses in Swiss family's shares coup
Minimum wage levels in OECD countries
Brent oil benchmark over $68 a barrel - up almost 50% in 2015
Global growth slows and manufacturing dips to 21-month low
Family-controlled firms dominate European business
Top 10 of world’s 250 largest consumer products companies account for 30% of sales
Nine of world's 20 fastest growing economies in Africa
Globalisation maybe stalling as trade growth remains weak
Global growth prospects uneven across major economies says IMF
Emerging markets growth lowest since 2009; Global growth at 30-year average
China's economic rebalancing hitting Latin American economies
New York, London, HK & Singapore top global financial centres index; Dublin recovers
Global growth in modest expansion from low oil prices/ monetary easing says OECD
Composite leading indicators point to positive change in growth momentum in the Eurozone
Global labour market trends portend paradise for some but uncertainty for many workers
Vienna remains top of World Quality of Living Rankings in 2015; Dublin at 34
Zurich and Geneva overtake Singapore to become world's most expensive cities
HSBC Switzerland and Falciani: How it happened
Global economic power to continue shift from advanced economies
Global food price index falls in January; Cereal output set for record
Global debt has risen $57tn or 17% of world GDP since 2007