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Rise in employment signals 2 per cent growth in Irish economy

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Growth next year will depend on what happens outside Ireland, according to the ESRI.

Image: protologue_np via Flickr

THE IRISH ECONOMY could grow by around two per cent in GNP this year based on growth in employment, according to the latest forecast from the ESRI.

The ESRI said the message from the employment numbers “is reinforced by the fall in the Live Register, which has continued in the third quarter of 2013″.

“These statistics, and a detailed examination of what lies behind all the other indicators, underpin our forecast of 2 per cent growth in GNP this year,” it said.

Growth next year will depend on what happens outside Ireland, the survey found, as we rely on the current forecasts for the Eurozone economy. These forecests could lead to growth of around 2.7 per cent for GNP in the Irish economy.

Public finances are expected to come in ahead of target, with borrowing at around 7 per cent of GDP. The ESRI said it continues to hold the view that the “most prudent” course of action in the 2014 Budget is to implement a fiscal adjustment of €3.1 billion.

On this basis, it forecast that borrowing next year would be just under 4.5 per cent of GDP, significantly below the target set in the medium-term economic strategy.

However yesterday, Finance Minister Michael Noonan said that the adjustment would be just above €2.5 billion. David Duffy of the ESRI told TheJournal.ie that this change would have little effect on the figures, with a 0.1 per cent increase in the growth forecast.

The survey said that understanding the pattern of growth in the Irish economy is “very difficult” this year as many of the key indicators that would normally be relied on are affected by special factors.

In particular, the data for industrial output, exports and, hence, GDP, are driven by an “exceptional fall” in the profitability of the pharmaceutical sector associated with the “patent cliff”, as patents expire and sales figures plummet.