Irish Economy 2012: Against a backdrop of a mild recession in Europe, a
knock-on impact on the UK and a weak recovery in the US, coupled with fiscal
retrenchments domestically and across Europe, the ESRI (Economic and Social
Research Institute) forecasts today that Ireland's GDP (gross domestic product)
will expand by 0.9% this year. GNP (gross national product - - a measure that
compared with GDP mainly reflects the exclusion of the profits of the
foreign-owned sector) will fall by 0.6% in 2012. In 2013, GDP is expected
to rise by 2.3% and GNP by 1%.
The economists say 'austerity' is absolutely
necessary in Ireland but when applied across the Eurozone, it is self-defeating.
The institute says in its Spring 2012
'Quarterly Economic Commentary' that there is very little change in
GDP in 2012 while GNP is set to remain broadly unchanged. Growth is set to
improve in 2013, high levels of factor flows will result in GNP growth remaining
moderate. The general picture of the economy is that following the fall of 7% in GDP and almost 10% in GNP in 2009 the economy has been fairly
flat. The main factor behind this was the weakness in domestic demand. This has
fallen every year since 2007 and is estimated to have declined by nearly 5% in 2011 and is forecast to fall again this year and next.
The economists estimate that the
Irish economy returned to modest growth in 2011, with real (inflation-adjusted) GDP increasing by
about 0.9%. However, employment has continued to fall and as a
consequence the unemployment rate averaged 14.2%. The
unemployment rate will more or less stabilise, at 14.0%, both
because of migration and because of a reduced participation rate.
On Thursday, the European Commission in its 2012 interim forecast report, said
Irish GDP will expand by 0.5% in 2012.
The ESRI says GDP rising by 0.9% is slightly lower than official
forecasts on which the budget was based. "Nonetheless, we think the fiscal
targets are realisable. The expenditure reductions in the budget will be
achieved, as numbers employed may decline by somewhat more than anticipated
as early retirement and retirement are not the only reasons for reductions
On the revenue side the institute is forecasting broad estimates for revenue
similar to those in Budget 2012, though there are differences by revenue
head. "The net effect is relatively small, so that the overall target should
Exports are expected to grow by 3.4% in 2012, and 3.8% in
2013, compared with 6.3% in 2011.
Gross government debt will rise to 120% of GDP in 2013.
Further contractions in disposable incomes will keep inflation subdued over the
forecast horizon. Some inflationary pressure is expected to be imported in
through higher oil prices which will feed in to higher transport and home
Executive Summary [pdf]
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