Ireland. Eurozone rebalancing. EY Eurozone Forecast June Portugal Slovakia Slovenia Spain. Latvia Lithuania Luxembourg Malta Netherlands

Similar documents
Slovenia. Eurozone rebalancing. EY Eurozone Forecast June Portugal Slovakia Slovenia Spain. Latvia Lithuania Luxembourg Malta Netherlands

Eurozone. EY Eurozone Forecast March 2015

Cyprus. Eurozone rebalancing. EY Eurozone Forecast June Portugal Slovakia Slovenia Spain. Latvia Lithuania Luxembourg Malta Netherlands

Eurozone. EY Eurozone Forecast March 2015

Eurozone. EY Eurozone Forecast March 2015

Greece. Eurozone rebalancing. EY Eurozone Forecast June Portugal Slovakia Slovenia Spain. Latvia Lithuania Luxembourg Malta Netherlands

Eurozone. EY Eurozone Forecast June 2014

Eurozone. EY Eurozone Forecast December 2014

Eurozone. EY Eurozone Forecast September 2014

Eurozone. EY Eurozone Forecast September 2013

Eurozone. EY Eurozone Forecast September 2013

Eurozone. EY Eurozone Forecast March 2014

Eurozone. EY Eurozone Forecast September 2014

Eurozone. EY Eurozone Forecast December 2013

Eurozone. EY Eurozone Forecast September 2014

Eurozone Ernst & Young Eurozone Forecast June 2013

Eurozone. EY Eurozone Forecast March 2015

Eurozone. EY Eurozone Forecast September 2014

Eurozone. EY Eurozone Forecast March 2014

Eurozone. EY Eurozone Forecast December 2013

Eurozone. EY Eurozone Forecast March 2014

Eurozone Ernst & Young Eurozone Forecast June 2013

Eurozone. EY Eurozone Forecast September 2014

Eurozone. EY Eurozone Forecast June 2014

Eurozone. EY Eurozone Forecast June 2014

Eurozone. EY Eurozone Forecast June 2014

Eurozone Ernst & Young Eurozone Forecast June 2013

Eurozone Ernst & Young Eurozone Forecast Summer edition June 2011

Eurozone Ernst & Young Eurozone Forecast Spring edition March 2013

Eurozone Ernst & Young Eurozone Forecast Winter edition December 2012

Eurozone Ernst & Young Eurozone Forecast Spring edition March 2012

Eurozone. EY Eurozone Forecast September 2014

Eurozone Ernst & Young Eurozone Forecast Spring edition March 2012

Eurozone Ernst & Young Eurozone Forecast Autumn edition September 2011

Eurozone. EY Eurozone Forecast September 2013

Ernst & Young Eurozone Forecast

In this report we discuss three important areas of the economy that have received a great deal of attention recently, namely:

EY ITEM Club Outlook for financial services

Domestic demand shows signs of life

Economic Projections For 2014 And 2015

Economic activity gathers pace

Malta: Sustaining rapid growth. necessitates strong investment

Global PMI. Global economy buoyed by rising US strength. June 12 th IHS Markit. All Rights Reserved.

Global PMI. Global economy suffers loss of momentum in March. April 10 th IHS Markit. All Rights Reserved.

Leumi. Global Economics Monthly Review. Arie Tal, Research Economist. May 8, The Finance Division, Economics Department. leumiusa.

Forecast on the Preliminary Quarterly Estimates of GDP. for the Jul-Sep Quarter of 2004

EY s Global Economic Outlook Ireland

Insolvency forecasts. Economic Research August 2017

Growth to accelerate. A quarterly analysis of trends in the Irish economy

Global analysis of health insurance in The Gulf Region

Main Economic & Financial Indicators The Czech Republic

Ulster Bank Northern Ireland PMI

file:///c:/users/cathy/appdata/local/microsoft/windows/temporary Int...

Minutes of the Monetary Policy Council decision-making meeting held on 2 September 2015

Global PMI. Global economy set for robust Q2 growth. June 8 th IHS Markit. All Rights Reserved.

Outlook for Economic Activity and Prices (April 2010)

Northern Ireland Quarterly Sectoral Forecasts

WTO lowers forecast after sub-par trade growth in first half of 2014

Haruhiko Kuroda: Japan s economy and monetary policy

ECONOMIC OUTLOOK UNIVERSITY OF CYPRUS ECONOMICS RESEARCH CENTRE. January 2017 SUMMARY. Issue 17/1

GDP REPORT 10 December 2018

Stable economy sets the stage for reforms in 2018

EY ITEM Club Outlook for financial services

Monthly Economic Review

MEDIUM-TERM FORECAST

Baseline U.S. Economic Outlook, Summary Table*

Outlook for Economic Activity and Prices (April 2017) Summary

Main Economic & Financial Indicators Hungary

Economic Projections :2

EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS. September 2006 Interim forecast

MINUTES OF THE MONETARY POLICY COMMITTEE MEETING 4 AND 5 NOVEMBER 2009

Investec Services PMI Ireland

The euro area economy: an update Euro Challenge November 2016

Summary and Economic Outlook

Northern Ireland Quarterly Sectoral Forecasts

Ulster Bank Northern Ireland PMI

Economic Survey December 2006 English Summary

Outlook for Economic Activity and Prices (July 2018)

Summary. Economic Update 1 / 7 December 2017

Eurozone Economic Watch. July 2018

Vietnam. HSBC Global Connections Report. October 2013

Economic ProjEctions for

Weekly Economic Commentary

Main Economic & Financial Indicators Poland

Projections for the Portuguese economy:

VICTORIAN BUILDING & CONSTRUCTION INDUSTRY OUTLOOK

No. 43/2018 Monetary Policy Report, June 2018 Mr. Jaturong Jantarangs, Assistant Governor of the Bank of Thailand (BOT) and Secretary of the Monetary

Japan's Economy and Monetary Policy

The euro area economy: an update Euro Challenge November 2016

Meeting with Analysts

ASEAN Insights: Regional trends

Global Macroeconomic Monthly Review

Economic Projections :1

Economic Outlook for FY2010 and FY2011

BCC UK Economic Forecast Q4 2015

Growth and Inflation Prospects and Monetary Policy

Projections for the Portuguese Economy:

OVERVIEW. The EU recovery is firming. Table 1: Overview - the winter 2014 forecast Real GDP. Unemployment rate. Inflation. Winter 2014 Winter 2014

Economic Projections :3

Macroeconomic Outlook November 2015

Transcription:

EY Forecast June 2015 rebalancing recovery

Outlook for Rising domestic demand improves prospects for 2015 Published in collaboration with

Highlights The Irish economy grew by 4.8% last year, which was the fastest growth rate in the European Union (EU). Some of this strength was due to a statistical quirk, but data revisions and a solid end to the year revealed that the recovery was more broad-based than it had previously appeared. Consumption and investment both posted strong outturns during Q4, with annual growth rates of 1.2% and 11.7% respectively. Short-term indicators suggest that domestic demand has maintained its momentum into this year. Q1 saw retail sales volumes up by 4.8% compared with a year earlier, while new car registrations rose by 24% over the same period. Admittedly, debt levels are continued labor market improvements growth remaining strong relative to recent years. We expect consumption to grow by 2.5% this year. Notwithstanding domestic improvements, the export sector will continue to play the key role in the Irish recovery. Overseas sales will be boosted in 2015 by the weak euro a result, in part, of the quantitative easing program from the European Central Bank (ECB). Although the Irish economy is not without its vulnerabilities (its reliance on net trade leaves it particularly exposed to shocks in its trading partners, for example), we now expect GDP growth of 3.7% this year, up slightly from our March forecast of 3.4%, with a similar outturn of 3.8% forecast for 2016. The participation rate has yet to show much improvement and is still well below pre-crisis levels. However, the labor market continues to improve, with to single digits falling to 9.8% in April from.1% in January. GDP growth 2015 3. 7% GDP growth 2016 3. 8% year on the output side. Building- and construction-related investment posted strong gains in 2014, growing by around 9%. This rebound is likely to cool somewhat in the year ahead, as red tape in the planning process and tight credit conditions curtail supply. Indeed, the construction Purchasing Managers Index (PMI) has fallen from 63.1 at the end of last year to 57.2 in April. But at that level, the index still signals solid expansion in the sector. And a faster pace of growth in new orders should underpin continued activity in the coming months. 2015 Unemployment 9. 6% Consumer prices 2015 0. 3% EY Forecast June 2015 1

Rising domestic demand improves prospects for 2015 GDP growth in 2015 now expected at 3.8% Last year saw robust GDP growth of 4.8%, the strongest in the EU. Admittedly, some of this was down to a statistical quirk. Contract manufacturing where production occurs abroad but sales are included in Irish output is estimated to have accounted for 40% of the rise in GDP in the first half of the year. However, data revisions and a strong end to the year revealed that the recovery was more broad-based than it had previously appeared. Rising consumer confidence, along with a strong rebound in the construction sector, saw annual consumption and investment growth of 1.2% and 11.7% respectively. As there are good reasons to expect that recovery in these sectors will continue, we have raised our forecast for GDP growth this year to 3.7% from 3.4% in our March report. with consumer spending on the rise Following three very sluggish quarters, consumption ended the year on a positive note, pulling annual growth up to 1.2%. Credit constraints are continuing to act as a drag on spending, with household debt currently at around 200% of GDP. But low oil prices, rising confidence levels and improvements in the labor market have helped spur higher spending. The short-term indicators suggest that spending growth has persisted into 2015. The seasonally adjusted volume of retail sales in Q1 was up 4.8% from a year earlier. Moreover, new car registrations were up by 24% over the same period. And the three-month moving average of the Economic and Social Research Institute/KCB consumer survey remains on an upward trend, despite slipping slightly to 97.6 in April from 98.3 in March. Indeed, in both January and March, the proportion of respondents expecting the economic situation to get better in the next 12 months was over 60%, the first two occasions this has occurred in the past 20 years. The steady improvements in the labor market are also continuing, with the unemployment rate falling to 9.9% in Q1 2015. As confidence builds in line with the wider economic recovery, we expect solid consumption growth to continue in the coming years. Table 1 (annual percentage changes unless specified) 2014 2015 2016 2017 2018 2019 GDP 4.8 3.7 3.8 2.9 2.9 2.9 Private consumption 1.2 2.5 3.1 2.4 2.5 2.2 Fixed investment 11.7 8.4 7.2 3.7 3.3 3.1 Stockbuilding (% of GDP) 1.5 1.0 1.1 1.1 1.0 0.7 Government consumption 0.2 0.5 0.1 0.7 0.8 0.8 Exports of goods and services 12.6 5.5 4.4 4.3 4.1 3.7 Imports of goods and services 13.2 5.0 4.4 4.3 3.8 3.1 Consumer prices 0.3 0.3 1.8 2.0 2.3 2.0 Unemployment rate (level) 11.3 9.6 9.0 8.4 8.1 8.0 Current account balance (% of GDP) 6.1 4.9 3.7 3.8 3.8 3.7 Government budget (% of GDP) 4.1 1.9 0.8 0.0 0.2 0.1 Government debt (% of GDP) 9.7 5.4 0.5 95.9 90.9 86.6 0.1 0.1 0.1 0.1 0.2 0.5 Euro effective exchange rate (1995 = 0) 123.9 114.4 113.1 113.3 114.7 116.2 Exchange rate (US$ per ) 1.33 1.11 1.07 1.06 1.09 1.11 2 EY Forecast June 2015

The economy entered deflationary territory in December and has remained there ever since. The annual EU-harmonized inflation rate averaged 0.4% in Q1 and stayed at this level in April. But this has been largely driven by falling oil prices, which are acting as the equivalent of a tax cut and are prompting further spending. As the year continues, oil price and exchange rate dynamics should counter some of this deflationary pressure, but the net effect should see inflation staying very low. We expect inflation to average just 0.3% this year providing scope for real terms growth in disposable incomes before rising to 1.8% in 2016. Investment cooled somewhat during Q4 2014, but its annual growth was still strong at around 12%. Much of this was due to a rebound in the property market, with building and constructionrelated investment which made up around a third of total investment last year growing by approximately 9%. We expect investment growth to continue this year, albeit at a slower pace, as the rebound in construction shows signs of cooling. Housing demand is high, but excessive red tape in the planning process and tight credit conditions are likely to constrain supply. Indeed, the construction PMI averaged around the low 50s during Q1, compared with figures of over 60 recorded at the end of last year. But the PMI rose again in April to 57.2, still signaling solid expansion in the sector. And a faster pace of growth in new orders should underpin continued activity in the coming months. Planning permissions also increased in 2014 for the first time since the property crash, a further sign of rising activity. A particularly encouraging feature of investment s performance in 2014 was the strength in machinery and equipment investment. Excluding the volatile transport component, equipment-related investment expanded by more than a third in the second half of 2014. This is a strong indicator of growing investor confidence, as firms take to replenishing capital stock levels. Moreover, survey data continues to show a high level of business confidence in 2015. Figure 1 Contributions to GDP Figure 2 Consumption and investment % year 15 Forecast % year 40 Forecast 12 30 Investment 9 6 GDP Net exports 20 3 0 0 3 6 20 Consumption 9 Domestic demand 12 2000 2002 2004 2006 2008 20 2012 2014 2016 2018 30 40 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Table 2 Forecast for by sector (annual percentage changes in gross added value) 2014 2015 2016 2017 2018 2019 GDP 4.8 3.7 3.8 2.9 2.9 2.9 Manufacturing 3.1 29.8 0.4 3.1 2.4 1.9 Agriculture 7.4 3.2 0.6 0.1 0.6 0.9 Construction.3 7.1 6.6 5.5 5.2 3.2 Utilities 3.3 3.6 3.8 2.3 2.3 2.3 Trade 5.2 2.1 2.7 2.1 1.8 1.5 Financial and business services 8.4 4.8 5.2 4.1 4.1 4.0 Communications 4.0 3.4 4.3 3.5 3.9 4.0 Non market services 0.7 0.6 0.4 0.8 0.9 0.9 EY Forecast June 2015 3

Rising domestic demand improves prospects for 2015 On a less positive note, tight credit conditions remain a key obstacle to all forms of investment growth. The latest business lending survey showed that while loan demand increased across all forms of enterprise, credit supply remained unchanged. But as the banks return to health, increased confidence is likely to translate gradually into more lending. Weighing up the impact of credit constraints against the otherwise mostly positive picture, we expect solid investment growth in the near term. We have raised our forecast for investment growth to 8.4% this year from the 4.5% seen in our March report. Exports retain key role in economy Notwithstanding the positive outlook for domestic demand, as a small open economy remains reliant on its trade sector to drive its recovery. Despite a weaker end to 2014, exports surged 12.6% last year. However, much of the reported strength during the first half of last year was due to a statistical quirk. Assuming that no further statistical discrepancies arise, we expect that exports will grow more in line with the performances of s main trading partners in the near to medium term. Vulnerabilities remain, but outlook is largely positive Despite the mostly positive developments, some key downside risks persist. In particular, reliance on net trade is a mixed blessing, because it leaves vulnerable to a slowdown in global growth. Destabilization within the, perhaps triggered by further problems in, could derail the export-led recovery. And closer to home, with 17% of all Irish exports currently going to the UK, the possibility of the latter leaving the EU may leave some investors nervous. Overall, though, we believe that the positives outweigh the negatives, now that domestic demand is beginning to support the recovery. So although we expect slower GDP growth this year than in 2014, the growing contribution of domestic demand means that this growth will be built on a more stable base. As a result, we see solid growth continuing in 2016, at 3.8%, before a modest slowdown to just under 3% a year in 2017 19. This outlook is positive, as is expected to benefit from robust growth in the UK and the US. In particular, is likely to benefit from the ECB s program of quantitative easing. The resulting weaker euro should boost Irish exports over the course of the year, as the US and the UK together receive more than a third of Irish exports. We forecast exports to grow by a healthy 5.5% this year. Figure 3 Exports and imports % year 16 Forecast 14 12 8 Exports 6 4 2 0 2 4 6 8 Imports 12 2006 2008 20 2012 2014 2016 2018 Figure 4 Credit growth % year 40 30 20 0 20 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20 2011 2012 2013 2014 2015 Source: Central Statistics Of ce of ; Haver Analytics. 4 EY Forecast June 2015

in ia 4.0 0 4.0 3.2 80 3.0 2.4 0.4 60 2.0 4.0-0.5 1.5 2.0 40 1.0-1.4 0.0-2.2 200.70.0-2.0-3.1-4.0 7.6 5.2 2.8 0.4-0.1 0.2 0.4 0.7 1.0 2.0 0.1 4.0 0.31.72.0 0.6 6.0 1.0 0.7 4.0 8.0 3.8 1.5 1.2 6.0 2.0 5.8 1.6 8.0 7.9 2.0 l Macroeconomic data and analysis Learn more about the EY Forecast at ey.com/eurozone: Download the latest EY Forecast and individual forecasts for the 19 member states. Use our dynamic Eurochart to compare country Use the trend analysis tool to compare forecasts 19 nations. EY Forecast June 2015 rebalancing recovery EY Forecast June 2015 rebalancing recovery ry Forecast March 2015 You can select multiple countries to display on the chart. Country EY Forecast June 2015 rebalancing recovery y Current Account Balance Government Budget Unemployment rate Government Debt GDP rebalancing ng recovery ry Private Consumption EY Forecast June 2015 Trend analysis Fixed Investment Stockbuilding Government Consumption C Clear selection Consumer Prices Exports of Goods and Services Imports of Goods and Services Select a year to compare: 2013 2014 2015 2016 2017 2018 EY Forecast Spring 2015 EY s attractiveness survey Europe 2015 Comeback time Outlook for EY Forecast: outlook for Spring 2015 EY s attractiveness survey: Europe 2015 The explores the implications of the latest economic forecasts for banks, asset managers and insurers. Our latest forecast sees improving GDP, growth in consumer spending and falling unemployment across the. Learn more and download the report at ey.com/ fseurozone. are annual reports that examine the attractiveness of selected nations and regions to foreign investors. Europe remains the world s top destination for foreign direct investment. Learn more and download the report at ey.com/ attractiveness.

EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2015 EYGM Limited. All Rights Reserved. EYG no. AU3277 BMC Agency GA 0401_01971 ED None In line with EY s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. About Oxford Economics Oxford Economics was founded in 1981 to provide independent forecasting and analysis tailored to the needs of economists and planners in government and business. It is now one of the world s leading providers of economic analysis, advice and models, with over 850 clients including international organizations, government departments and central banks around the world, and a large number of multinational blue-chip companies across the whole industrial spectrum. Oxford Economics commands a high degree of professional and technical expertise, both in its own staff of over 150, including 90 economists, based in Oxford, London, Belfast, Paris, the UAE, Singapore, New York and Philadelphia, and through its close links with Oxford University and a range of partner institutions in Europe and the US. Oxford Economics services include forecasting for 200 countries, 0 sectors, and 3,000 cities and sub-regions in Europe and Asia; economic impact assessments; policy analysis; and work on the economics of energy and sustainability. The forecasts presented in this report are based on information obtained from public sources that we consider to be reliable but we assume no liability for their completeness or accuracy. The analysis presented in this report is for information purposes only and Oxford Economics does not warrant that its forecasts, projections, advice and/or recommendations will be accurate or achievable. Oxford Economics will not be liable for the contents of any of the foregoing or for the reliance by readers on any of the foregoing. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com