A GLOOMY ANALYSIS from the national economic think-tank says the Irish economy is “bouncing along the bottom” of an economic rut and that Ireland’s economy will probably contract this year.
The latest quarterly economic commentary from the ESRI forecasts that Gross National Product (GNP), a measure of Ireland’s ‘domestic’ economy, will shrink by 0.2 per cent.
Gross Domestic Product (GDP), which includes Ireland’s booming export sector, is expected to increase by 1.8 per cent, however – which would be good news given that it is GDP which is used by the Troika to set Ireland’s deficit targets.
By both measures the economy is projected to grow in 2013, with GDP rising by 2.1 per cent and GNP up by a third of that amount, 0.7 per cent, a modest growth which means unemployment will remain high.
The report also warns that though the public finances are improving, the scale of the adjustment needed remains large – pointing out that even if the costs of servicing the sovereign and banking bailouts were removed, Ireland would still be taking in more than it earns.
Irrespective of whether spending cuts are specifically targeted or implemented across the board, “significant cuts in public expenditure need to be implemented to return the public finances to a stable pattern,” the report says.
The ESRI’s advice echoes that of the Irish Fiscal Advisory Council, which for the second time has advocated that the government implement its full requirement of spending cuts in one Budget – suggesting an all-in-one Budget would help Ireland get back to the bond markets quicker and mitigate any economic hardship.
The ESRI report, which was distributed earlier this week but embargoed until this morning, was compiled before the Central Statistics Office published figures which showed GNP as having grown by 4.3 per cent in the second quarter – a growth which may undermine the ESRI forecasts.