ESRI Predicts Continued Strong Economic Growth In Ireland

by Jason Gorringe, Tax-News.com, London

27 July 2006

Ireland's Economic and Social Research Institute has this week published its Quarterly Economic Commentary (QEC) Summer 2006.

Some of the main findings identified by the report's authors, Dr. Alan Barrett, Dr. Ide Kearney, and Yvonne McCarthy, include:

• Strong economic growth will continue in 2006 with both GNP and GDP forecast to grow by 5.6% in 2006. For 2007, GNP growth of 5.1% and 5.2% for GDP has been forecast.
• Consumption is expected to continue to grow strongly over the forecast horizon, driven by a very robust labour market, healthy incomes growth and a contribution from the maturing of the SSIAs.
• Investment demand will also remain strong with growth rates forecast of 8.3% in 2006 and 6.5% in 2007.
• An acceleration in the pace of government spending growth in the run up to the election is anticipated.
• In contract to the domestic sources of demand, net exports will make a negative contribution to GNP growth, with imports growing more strongly than exports.
• Employment increases of 85,000 in 2006 and 74,000 are expected in 2007. These increases imply a continuing strong rate of immigration with gross inflows forecast of 69,000 in 2006 and 62,000 in 2007.
• On inflation, increases in the CPI are expected to average 3.8% for the year, implying rates of over 4% for the remainder of the year. Inflation should ease next year, partly because of fewer interest rate increases.

While the picture emerging for the remainder of 2006 and 2007 is bright, a number of trends and prospects point to slower growth beyond the forecast horizon of the QEC.

This led the authors to include a cautionary note to the effect that:

“Low productivity growth, an increasing balance of payments deficit, an over-reliance on construction and the end to the maturing of the SSIAs all point to poorer prospects in 2008 and beyond."

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