Irish economy: Outlook

Transcription

1 Irish economy: Outlook Terry Quinn, IEA, September 24 th 218 Terry Quinn Irish Economic Analysis Division

2 Overview Economy continues to expand at a robust pace, in its 6 th year of recovery GDP growth of 7.2% last year, 4.7 % growth in 218, 4.2% in 219 Exports are performing well but domestic demand accounts for most of the growth Employment growing strongly, unemployment falling sharply GDP is distorted by the multinational sector Overstates the strength of the recovery -26% growth in 215 Understated the extent of the crisis - resilient exports offset a collapse in domestic demand Underlying indicators are more informative Labour market indicators - employment and unemployment Underlying domestic demand - consumer spending and underlying investment GNI* Inflation Inflation below EA average, sterling decline feeding through to goods prices, services inflation moderate except for rents 2

3 GDP overstates the size and growth rate of the Irish Economy..especially since 215 Figure: Real Output in the Irish Economy (growth) 3, Figure: Output in the Irish Economy (level) 3 25 Real GDP 25, Nominal GDP Nominal GNP 2 15 Real GNP Real GNI* 2, Nominal GNI* % growth 1 5 millions 15, 1, -5 5, -1 CBI estimate for real GNI*

4 Irish economy - Outlook Forecast Summary Bulletin No.4 - October f 219 f 22 f GDP Consumption Investment Exports Imports Underlying Domestic Demand Employment Unemployment Inflation (HICP) % GDP Growth Consumption Government Investment Exports Imports Stocks GDP 2

5 Growth driven by domestic spending labour market strength 6 Underlying Domestic Demand and Employment Growth, Annual % Change 15 Employment, Part-Time and Full-Time, Annual % change 4 1 Percentage year-on-year 2-2 y-o-y % change Employment Underlying Domestic Demand f 219f -15 Q2 Q4 1 Q2 3 Q4 4 Q2 6 Q4 7 Q2 9 Q4 1 Q2 12 Q4 13 Q2 15 Q4 16 Q2 18 Full-Time Part-Time Employment 4

6 Strong recovery in employment but has only recently surpassed it s pre-crisis peak Chart: Annual Employment Change 2,3 Employment Level ,2 2,1 Total Non-construction Peak 1 2, 's 5-5 's 1,9 1,8 1, Forecast period Change in Full Time Change in Part- Time 1,6 1, Change in Employment f 219f 1, f 219f 5

7 7 Employment Growth by Region Q2 212 = Border West Mid-West South-East South-West Dublin Mid-East Midland State Q2 212 Q2 218

8 Unemployment Rate by Region: Q2 212 and Q per cent of labour force Border West Mid-West South-East South-West Dublin Mid-East Midland State Q2 212 Q2 218

9 Labour market approaching capacity across a range of measures sources of supply? 4 35 Labour Supply: Stock of Unemployed Workers 2 15 Change in Labour Force Participation Rate by Gender and Age, 27Q2-218Q2, Percentage Points 3 1 thousands p.p. change Males Females Total Q2 98 Q1 99 Q4 99 Q3 Q2 1 Q1 2 Q4 2 Q3 3 Q2 4 Q1 5 Q4 5 Q3 6 Short-term unemployment Q2 7 Q1 8 Q4 8 Q3 9 Q2 1 Q1 11 Q4 11 Q3 12 Long-term unemployment Q2 13 Q1 14 Q4 14 Q3 15 Q2 16 Q1 17 Q Total (Youths) Total 9

10 Net Immigration, % of LF % of labour force Net immigration, % of LF

11 Wages and incomes recovering consumer price inflation remains subdued 6 Household Income and Nominal Consumption 4 Wages and Inflation % % Consumption growth (nominal) Adjusted gross personal disposable income (ESA21) Compensation per employee HICP 219f 218f f 218f

12 Consumption gradually approaching it s pre-crisis peak. but investment recovery skewed by multinationals Consumption per capita (volumes) Investment (volumes) = = f 219f f219f Investment Underlying Investment Construction Core Machinery and Equipment Housing completions 7

13 Inflation Developments: Brexit effect through the exchange rate (Reddan and Rice, 217) 2. Inflation Contributions 1.5 Chart: Irish Inflation and Exchange Rate Changes % Services Goods HICP HICP excl. Energy Y-on-Y Change USD (RHS) HICP excl. Energy GBP (RHS) Exchange Rates Y-on-Y Change f 218f

14 Goods inflation weaker than can be explained by drivers 2.%.% -2.% -4.% -6.% Actual -8.% Conditional Forecast -1.% 21Q1 23Q1 25Q1 27Q1 29Q1 211Q1 213Q1 215Q1 Recent Box (QB 218.3) examined the case of Non Energy Industrial Goods. Clothing, appliances, furniture etc. Lower than expected given developments in main drivers (GBP, oil prices, domestic demand) Possible measurement issues related to quality adjustment, particularly in IT products and clothing. 9

15 Risks and Conundrums Risks of pro-cyclicality Economy is approaching full employment with capacity constraints beginning to emerge Risk of complacency Ireland is vulnerable given its openness and extensive trade, tech and financial linkages Domestic challenges: How much spare capacity is there in the domestic economy? Avoiding pro-cyclicality in policy External risks: Brexit Protectionism Impact of international tax regimes on FDI decisions 2

16 Thank you 16 11