Irish Economy growth rate 2011 : forecast cut

hinault

I see the IMF and Bank of Ireland have both forecast another cut in Ireland's economic growth rate to 0.5% (down from 1% growth forecast).

http://www.rte.ie/news/2011/0411/imf-business.html

The EU/IMF deal was underpinned by annual growth rate 1.75%.


Last one leaving make sure to switch off the lights, thanks.

macannrb

this was one of the arguments of how we were going to meet our targets right?

so much for the front loading that FF made all the noise about, we will end up having to cut more from expenditure, as we wont raise the taxes needed

RichardAnd

macannrb wrote: »

this was one of the arguments of how we were going to meet our targets right?

so much for the front loading that FF made all the noise about, we will end up having to cut more from expenditure, as we wont raise the taxes needed

Better to trim the fat than to pay for for it. Likely though, we'll see both and we'll see them in the coming "jobs budget".

Idbatterim

I think pretty much all of us that post here knew the growth rates were too optimistic! I posted it numerous times, ofcourse that doesnt suit FF/FG/Lab, the higher the projected rates, the less they could get away with cutting in the short term...

beeftotheheels

Idbatterim wrote: »

I think pretty much all of us that post here knew the growth rates were too optimistic! I posted it numerous times, ofcourse that doesnt suit FF/FG/Lab, the higher the projected rates, the less they could get away with cutting in the short term...

That's not entirely true. You will find that a number of posters here, and economists at large, have been arguing that the cuts were excessive and that this made the forecasts optimistic.

So, lots of people thought the forecasts optimistic, not all agreed that increasing the cuts would help with that.

http://www.irishcentral.com/news/Paul-Krugman-If-US-follow-Ireland-austerity-they-face-ruin-118702799.html

Idbatterim

Id like to know Krugmanns great and easy solution then, the "savage austerity" is a joke, the only thing savage was the sham boom! What does he propose, keeping our prices way out of line with our trading partners, remaining uncompetitive? building up even insaner amounts of debt? at what point would he like us to return to bond markets? if anything his ilk are closet celebrity economists! Usually if something appears too good to be true... It is!

beeftotheheels

Idbatterim wrote: »

if anything his ilk are closet celebrity economists!

Where is the closet? That ould Nobel memorial prize closet? He is a celebrity economist, I'm not disputing that. I'm just suggesting that the views of himself and other respected Keynesian economists ought to be considered.

Idbatterim wrote: »

Id like to know Krugmanns great and easy solution then

He doesn't offer a great and easy solution. I don't think anyone with the brains they were born with is offering a great and easy solution at this moment in time. This is complicated, this is unprecedented, and no one is sure how it ends. However, the degree of austerity in the EU/ IMF plan carried the risk that it would stifle growth, and growth is not looking too healthy at the moment.

Idbatterim wrote: »

...keeping our prices way out of line with our trading partners, remaining uncompetitive? building up even insaner amounts of debt? at what point would he like us to return to bond markets?

First off - prices. How does increasing austerity get our prices back in line with our trading partners? What are we talking about btw - the price of cabbage?

Secondly - the debt burden. The logic is that if the economy grows sufficiently then the debt : GDP burden falls while the debt remains stagnant/ increases in real terms. If the economy contracts then the debt : GDP burden increases while the debt remains stagnant in real terms. Perfectly happy to have a philosophical discussion on this, no one knows what the right answer is, but the debt to GDP (or perhaps GNP) ratio is a far better barometer of the sustainability of our debt burden than just saying €100m is a very big number.

Thirdly - if we see the debt to GDP/ GNP burden easing, and sustainable growth, that could get us back into the bond markets a lot quicker than an increasing debt/GNP ratio and contraction, which seems to be a potential outcome to increased austerity.

I don't think anyone knows the answer, but not many economists are suggesting that increased austerity is the way forward here. The UK is reversing their attempt to cut themselves out of this mess.

andrew

Idbatterim wrote: »

Id like to know Krugmanns great and easy solution then, the "savage austerity" is a joke, the only thing savage was the sham boom! What does he propose, keeping our prices way out of line with our trading partners, remaining uncompetitive? building up even insaner amounts of debt? at what point would he like us to return to bond markets? if anything his ilk are closet celebrity economists! Usually if something appears too good to be true... It is!

AFAIK Krguman didn't/doesn't argue that the solutions which he proposed for other, larger economies are applicable to ireland (because they're not)

macannrb

beeftotheheels wrote: »

I'm just suggesting that the views of himself and other respected Keynesian economists ought to be considered.

I think there is a general view out there, particularly amongst those who don't believe Keynesian economics, that the way we are headed means taking on too much debt. Debt we would inevitably default on.

beeftotheheels wrote: »

However, the degree of austerity in the EU/ IMF plan carried the risk that it would stifle growth, and growth is not looking too healthy at the moment.

I would agree that austerity stifles growth no question about it, but the Keynesian way of pumping money in, and letting the multipler do the work is probably not suited too well to this scenario. The public sector appears to be inefficient, and therefore throwing good money after bad, only keeps the inefficiencies in the system. The HSE is a prime example. Also given that there is so much uncertainty those in the PS and plenty others, are saving money at higher rates then before, and therefore the multiplier effect decreases, if it remains in Ireland that is. Notice all the flight in deposits...

beeftotheheels wrote: »

First off - prices. How does increasing austerity get our prices back in line with our trading partners?

Rent costs are pushed up by rent allowance, and it is almost impossible to get accommodation in a contained unit for under 700 euro. Incidentally rent allowance can be got for 700, up to 1100 AFAIK. This would bring down the cost in comparison to Germany where there are better renting conditions. The concept of getting the government to spend less money, would in theory reduce the demand and prices drop. Not for everything like mortgage payments and energy costs obviously.

beeftotheheels wrote: »

Secondly - the debt burden. The logic is that if the economy grows

Without a working banking system nothing will grow. Given the current climate, I would think E&Y's growth predictions of no growth until 2013 (i think) are optimistic

beeftotheheels wrote: »

the debt to GDP (or perhaps GNP) ratio is a far better barometer of the sustainability of our debt burden than just saying €100m is a very big number.

I agree that its better to use a yard stick then just numbers, but if you compare the deficit to the income, 22bn vs 32bn it gives a better indication of how unsustainable this environment is. Add all the debt accumulated by the government national, nama, bank capitalisation and divide it by the government revenue, and its worse again. I agree that debt to gdp is widely used, and the predictions are that we will have 120% ratio. And I think that estimate was based on the IMF growth predictions.


[/QUOTE]I don't think anyone knows the answer, but not many economists are suggesting that increased austerity is the way forward here. The UK is reversing their attempt to cut themselves out of this mess.[/QUOTE]

The UK can borrow on the markets. They have a functioning banking system and their economy has belief that things will get better (to a larger degree then here anyway).

I know you may point out Japan's last decade as a reason to pump money out of the government, but I would question whether we would be any less like them if we did. I fear that we will have a decade of stagnation regardless of what we do, maybe we are better off keeping a better credit record even if the markets don't have the best of memories

fat__tony

Double-dip recession is on the way.

The country is screwed for at least the next 10 years.

beeftotheheels

macannrb wrote: »

I think there is a general view out there, particularly amongst those who don't believe Keynesian economics, that the way we are headed means taking on too much debt. Debt we would inevitably default on.

You see, my view is that we've already taken on too much debt, and unless we can grow into it default is already on the table

macannrb wrote: »

I would agree that austerity stifles growth no question about it, but the Keynesian way of pumping money in, and letting the multipler do the work is probably not suited too well to this scenario. The public sector appears to be inefficient, and therefore throwing good money after bad, only keeps the inefficiencies in the system. The HSE is a prime example. Also given that there is so much uncertainty those in the PS and plenty others, are saving money at higher rates then before, and therefore the multiplier effect decreases, if it remains in Ireland that is. Notice all the flight in deposits...

I don't disagree that we have a daft, inefficient and overpaid public sector, which I want to see corrected over time. The problem is that the public sector salaries generate tax revenue, as do public sector pensions, so any cuts are not worth what they say on the tin leaving out the multiplier. I think we need to increase the tax base and bring more families back into the tax net, I just can't see how cutting spending and increasing taxes too drastically in the short term is going to do anything but stifle growth.

macannrb wrote: »

Rent costs are pushed up by rent allowance, and it is almost impossible to get accommodation in a contained unit for under 700 euro. Incidentally rent allowance can be got for 700, up to 1100 AFAIK. This would bring down the cost in comparison to Germany where there are better renting conditions. The concept of getting the government to spend less money, would in theory reduce the demand and prices drop. Not for everything like mortgage payments and energy costs obviously.

What is the benefit of having rental prices decrease in an economy verging on stagnation - deflation? Lets deflate our way back to growth? Novel, I'll give you that.:)

macannrb wrote: »

I agree that its better to use a yard stick then just numbers, but if you compare the deficit to the income, 22bn vs 32bn it gives a better indication of how unsustainable this environment is. Add all the debt accumulated by the government national, nama, bank capitalisation and divide it by the government revenue, and its worse again. I agree that debt to gdp is widely used, and the predictions are that we will have 120% ratio. And I think that estimate was based on the IMF growth predictions.

I don't disagree that it is a nasty deficit. However, if we cut expenditure and it doesn't generate the hoped for confidence allowing us to return to growth, we will see revenues decrease, and social welfare payments increase. We might narrow the gap but at what cost? Debt to GNP will have increased.

macannrb wrote: »

The UK can borrow on the markets. They have a functioning banking system and their economy has belief that things will get better (to a larger degree then here anyway).

Yes the UK can borrow, so their austerity was self imposed, and yet they are reversing it as a bad idea. No, we're not the UK, our austerity is being imposed from outside, I'm simply questioning the benefits of the degree of austerity we have agreed to.

macannrb wrote: »

I know you may point out Japan's last decade as a reason to pump money out of the government, but I would question whether we would be any less like them if we did. I fear that we will have a decade of stagnation regardless of what we do, maybe we are better off keeping a better credit record even if the markets don't have the best of memories

You see, we agree on this fact, I just doubt that austerity will give us a better credit record.

Without growth our current debt burden in unmanageable.

So, to my mind the choice is we go down the austerity route, we have no hope of getting out of this in 10 years, we probably default on some of it along the way, but when we get out of it it our debts should be manageable or, we gamble on cutting more slowly to allow growth. If that growth returns we're back in the markets in 3/4 years. If it doesn't, we're in a worse position (although since I suspect we're pretty damn close to an unsustainable debt burden without growth, I'm not sure how much worse it can get - defaulting on €10bn vs defaulting on €15bn, defaulting on €30bn vs defaulting on €38bn)? Default is default.

I'm actually not a gambler, but I think we have to gamble on reducing austerity now, as the costs of getting it wrong are not much worse than the default (quantum of default, not will we default) which is already looming, the benefits of getting it right allow us to return to normal and pay our way. I just hope our EU bankers agree to take the gamble.

macannrb

I think we agree on a good few things, widening the tax rate, the debt we have is far too high, and the chances of getting out from under it are slim at best.

I think our view points are different. I am looking at the government finances and you are looking at the overall economy.

I see the removal of rent allowance (which pays half of private rents) as a way to reduce the gap between government expenditure, and you see it as deflating the economy. Both correct from our view points but I would argue my view point is more relevant since the government pays of the national debt, or in our case incurs it. And I would argue that there is so much waste in the government that we could bring down the expenditure at an even faster rate then we are doing. And thus reduce the amount of further debt we are taking on.

This would have the effect of deflating the economy which naturally leads to less tax income. But the government will find lots of ways to tax us. Which would in turn also lead to a wider tax net.

I think slowing down on the austerity is a bigger gamble, one that would surely leave us more open to the cruelty of the lenders. Of kindness of strangers.

Were we to default, people have theorised that we would have to balance the books and only spend the 30bn of government revenue that we currently have. unfortunately life under default would not be so pleasant. Our tax net to plummet to maybe half, our banks wouldn't work at all, our savings would be gone, and there would be chaos. However if we start to make headway at balancing our books on a yearly basis, then maybe we could default on the bank portion of our debt, a la David McWilliams version of defaulting, and maybe just maybe we might get access to the markets. We would definitely be in a better position to access the markets if we our last set of accounts before default was revenue 20bn, expenditure 25bn, as opposed to the same ratio except double, 40bn :50bn

beeftotheheels wrote: »

I'm actually not a gambler, but I think we have to gamble on reducing austerity now, as the costs of getting it wrong are not much worse than the default (quantum of default, not will we default) which is already looming, the benefits of getting it right allow us to return to normal and pay our way. I just hope our EU bankers agree to take the gamble.

I don't think either of us are gamblers, but I think we know the outlook is very uncertain no matter which school of thought we follow

WalterMitty

Meanwhile our politicians think the crook park steal that keeps judges ,consultant doctors etc on 200k + should be honoured! I suppose turkeys dont vote for xmas but they are gonna look very stupid when they are forced to cut public sector pay dramatically over coming years.

later12

fat__tony wrote: »

Double-dip recession is on the way.

The country is screwed for at least the next 10 years.

The danger here, fat__tony, is that some people will ignore the more substantive points being made on this thread, and that the above would be taken as anything resembling accuracy.

Out of interest, can you briefly explain how you've reached the conclusion that a double-dip recession is imminent, and more importantly, how you arrived at the figure of ten years specifically.

SupaNova

Where is the closet? That ould Nobel memorial prize closet? He is a celebrity economist, I'm not disputing that. I'm just suggesting that the views of himself and other respected Keynesian economists ought to be considered.

I honestly don't think the views of someone who advocated a housing bubble and the policies that lead to the current mess ought to be considered.

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html?scp=4&sq=krugman%20mcculley%20bubble&st=cse

EDIT: Also if he is one of the most respected Keynesian economists it doesn't say much for Keynesian economics.

Tipp Man

beeftotheheels wrote: »

I don't disagree that we have a daft, inefficient and overpaid public sector, which I want to see corrected over time. The problem is that the public sector salaries generate tax revenue, as do public sector pensions, so any cuts are not worth what they say on the tin leaving out the multiplier.

Really???? Are you sure about that???

SupaNova

Lol the idea that you actually pay taxes while receiving 100% of your income from the taxpayer is a bit of an oxymoron. I wonder if paying people on taxpayers payroll their real wage would save on paperwork.

beeftotheheels

Tipp Man wrote: »

Really???? Are you sure about that???

Yup, it is daft but it means that for every €1 cut in salaries you only save 70c or something as you've lost 30c in tax revenue. Am making a FOI request to try and get the real numbers of what the public sector costs us.

And it is more than that. If the public sector cut say €100 of spending on soap, we only save €79 because of lost VAT. Hence just cutting is more difficult because you have to cut 1xx% of what you want to save where xx is the amount of taxes (payroll and VAT) on government spend.

Tipp Man

beeftotheheels wrote: »

Yup, it is daft but it means that for every €1 cut in salaries you only save 70c or something as you've lost 30c in tax revenue. Am making a FOI request to try and get the real numbers of what the public sector costs us.

So the government pays a public servant €1 and takes 30% tax from him. This means the government is paying 70cent to the worker. so you could say the public servant is paying no tax just receiving a net salary

My question is where does the 70 cent originally come from to pay the public servant?? It must come from somewhere??

SupaNova

By the same logic someone on the dole paying taxes on whatever they buy is contributing to tax revenue.

K-9

Tipp Man wrote: »

So the government pays a public servant €1 and takes 30% tax from him. This means the government is paying 70cent to the worker. so you could say the public servant is paying no tax just receiving a net salary

My question is where does the 70 cent originally come from to pay the public servant?? It must come from somewhere??

Well it should come from tax revenues, not huge borrowings, but that is kind of stating the obvious.

What happens if you cut the Public Sector pay bill by say 20%, is that direct tax revenues also drop, Income tax, PRSI and the social levy as well as pension deductions. Of that 70 cent paid, much of it is spent in the local economy as PS workers spend like the rest of so local shops suffer reductions in turnover and pay less VAT and taxes on profits.

It's a bit like the multiplier effect which in Europe means a cut of 1% in GDP by cutting Government spending means a .5/.6% cut in growth, rather like what the OP is about.

SupaNova wrote: »

By the same logic someone on the dole paying taxes on whatever they buy is contributing to tax revenue.

Well actually yes, though I'd think less than a PS worker. Spending in shops should be on more basic stuff, probably more 0 rated VAT goods, but it's still money spent in the local shop, less of it means less turnover, less profits, maybe staff reductions etc.

We all know the cuts are needed but some don't seem to get the connection that the cuts are causing lower growth. Exports are doing well but they don't create much extra employment as it's dominated by foreign MNC's.

SupaNova

Well actually yes, though I'd think less than a PS worker. Spending in shops should be on more basic stuff, probably more 0 rated VAT goods, but it's still money spent in the local shop, less of it means less turnover, less profits, maybe staff reductions etc.

We all know the cuts are needed but some don't seem to get the connection that the cuts are causing lower growth. Exports are doing well but they don't create much extra employment as it's dominated by foreign MNC's.

They are always taking more from tax revenues than they are putting back in. So calling them contributors to tax revenues would not be correct.

Tipp Man

K-9 wrote: »

Well it should come from tax revenues, not huge borrowings, but that is kind of stating the obvious.

Tax revenue generated from the private sector

Thats the whole point, government recipients are not creators of tax, merely redistributors of tax. That is the point and its a key point. If there was no tax receipts from the private sector then the government would literally receive no money

K-9

SupaNova wrote: »

By the same logic someone on the dole paying taxes on whatever they buy is contributing to tax revenue.

SupaNova wrote: »

They are always taking more from tax revenues than they are putting back in. So calling them contributors to tax revenues would not be correct.

That wasn't your initial point, your point was the PS isn't contributing to tax revenue as that's like saying Welfare recipients contribute to tax. I'd accept the logic on Welfare but unless you want the PS to pay 100% taxes they'll always not contribute taxes by your definition.

Tipp Man wrote: »

Tax revenue generated from the private sector

Thats the whole point, government recipients are not creators of tax, merely redistributors of tax. That is the point and its a key point. If there was no tax receipts from the private sector then the government would literally receive no money

Of course tax revenue generated by the private sector which will get hit by cuts to Government spending. If there was no tax receipts from the private sector we'd be in a libertarian society, one that most libertarians don't even agree with.

The same tax revenues you are worried about will drop with cuts. If you cut the €18 Billion deficit tomorrow, you'd need to either substantially raise taxes or cut more again to cover the less taxes received, less money in the economy, resultant huge growth in unemployment and deficit, or we could just borrow the new deficit.

Tipp Man

K-9 wrote: »

That wasn't your initial point, your point was the PS isn't contributing to tax revenue as that's like saying Welfare recipients contribute to tax. I'd accept the logic on Welfare but unless you want the PS to pay 100% taxes they'll always not contribute taxes by your definition.



Of course tax revenue generated by the private sector which will get hit by cuts to Government spending. If there was no tax receipts from the private sector we'd be in a libertarian society, one that most libertarians don't even agree with.

The same tax revenues you are worried about will drop with cuts. If you cut the €18 Billion deficit tomorrow, you'd need to either substantially raise taxes or cut more again to cover the less taxes received, less money in the economy, resultant huge growth in unemployment and deficit, or we could just borrow the new deficit.

I never said that I didn't want the private sector not to pay taxes. I merely pointed out that recipients of government money are merely redistributing the money and not actually generating taxes - the OP i quoted said they were tax generators - they aren't

If we cut the 18 billion deficit tomorrow then the resultant shortfall from loss of tax revenue would be far less than 18 billion so a net gain for the government

Its amazing that this country survived in 2003 when current budget spending was a mere 28 billion as opposed to the whopping 50 billion in 2010.

K-9

Tipp Man wrote: »

I never said that I didn't want the private sector not to pay taxes. I merely pointed out that recipients of government money are merely redistributing the money and not actually generating taxes - the OP i quoted said they were tax generators - they aren't

If we cut the 18 billion deficit tomorrow then the resultant shortfall from loss of tax revenue would be far less than 18 billion so a net gain for the government

Its amazing that this country survived in 2003 when current budget spending was a mere 28 billion as opposed to the whopping 50 billion in 2010.

No, you made the point that if there was no private sector tax revenue there'd be no money for the Government to redistribute, in that scenario we probably wouldn't have a Government, more like Somalia, we'd have no deficit either.

Obviously cutting 18 Billion would be a net gain but it's overstated. We don't need cuts of 18 Billion, closer to say 25 Billion, to get the net gain of 18 Billion.

It's pointless comparing us to 03. If we cut back to 03 levels of expenditure tomorrow we are in a totally different environment, we wouldn't be going back to 03 levels, we'd be cutting expenditure by over 40%, it wouldn't be anything like 2003 as tax revenues would take a severe drop and we'd be in a depression.

Tipp Man

K-9 wrote: »

No, you made the point that if there was no private sector tax revenue there'd be no money for the Government to redistribute, in that scenario we probably wouldn't have a Government, more like Somalia, we'd have no deficit either..

No my original point was that government recipients were NOT tax generators - I used the (extreme) example of the private sector not paying any tax to illustrate that the government would have no tax income to make expenditure

K-9 wrote: »

Obviously cutting 18 Billion would be a net gain but it's overstated. We don't need cuts of 18 Billion, closer to say 25 Billion, to get the net gain of 18 Billion.

It's pointless comparing us to 03. If we cut back to 03 levels of expenditure tomorrow we are in a totally different environment, we wouldn't be going back to 03 levels, we'd be cutting expenditure by over 40%, it wouldn't be anything like 2003 as tax revenues would take a severe drop and we'd be in a depression.

There are 2 major differences between now and 2003:

1) government spending is nearly double now what it was then (yet remarkable tax receipts at a similar level)
2) everybody has become accustomed to the cushy lifestyle and don't want to face up to the harsh realites that face this country

I didn't realise we were in a depression in 2003, I thought this mess only started (or should i say was realised) in 2008.

Whether you like it or not our medium term tax returns are going to be similar to 2003 levels. We need to get the expenditure back to a similar kind of level also and we need to do whatever it takes to get us there

fat__tony

later10 wrote: »

The danger here, fat__tony, is that some people will ignore the more substantive points being made on this thread, and that the above would be taken as anything resembling accuracy.

Out of interest, can you briefly explain how you've reached the conclusion that a double-dip recession is imminent, and more importantly, how you arrived at the figure of ten years specifically.

Ok, I hold my hands up, I've went for worst case scenario purely out of gut feeling.

Two successive quarters of negative growth cannot be ruled out due to the massive correction in fiscal measures still required until 2016.

Ernst and Young predict zero growth until 2013.

The ten year timeframe is based roughly on the previous recession of the 1980's where low growth and high unemployment were prevalent for at least 10-12 years.

K-9

Tipp Man wrote: »

No my original point was that government recipients were NOT tax generators - I used the (extreme) example of the private sector not paying any tax to illustrate that the government would have no tax income to make expenditure

Fair enough, notice I don't use extreme examples, I find them pointless.

There are 2 major differences between now and 2003:

1) government spending is nearly double now what it was then (yet remarkable tax receipts at a similar level)
2) everybody has become accustomed to the cushy lifestyle and don't want to face up to the harsh realites that face this country

1) I'm not going over why that is the case. You know it, I know it and the dog on the street knows it. Expenditure too high and taxes too low, hence a reliance on windfall taxes.

2) Agreed.

Tipp Man wrote:

I didn't realise we were in a depression in 2003,

We started the causes of the recession then, well probably 02. In 02/03 we had an economy on the up, in growth. Going back to 02/03 levels of expenditure will be a depression. That's the difference. Apples and oranges.

I thought this mess only started (or should i say was realised) in 2008.

Seriously? It started in 02/03, some would say long before that. The mess came to a head in 08.

Whether you like it or not our medium term tax returns are going to be similar to 2003 levels. We need to get the expenditure back to a similar kind of level also and we need to do whatever it takes to get us there

Whether I like it or not? I'm pointing out to you, that cutting to 03 expenditure levels will means tax revenues dropping to say 00 levels. The only reason we aren't at 00 levels of tax revenues is considerable tax rises and cuts to credits.

SupaNova

That wasn't your initial point, your point was the PS isn't contributing to tax revenue as that's like saying Welfare recipients contribute to tax. I'd accept the logic on Welfare but unless you want the PS to pay 100% taxes they'll always not contribute taxes by your definition.

I'm not saying that it should be different, just calling it the way it is. If they put 100% of their wage back into the economy(or paid 100% tax) they would only be break even as far as tax revenue is concerned. If you just paid the public sector their net wage it would not make any difference to tax revenue. A public sector wage cut would not mean reduced tax revenue, it would mean less taken from tax revenue by my definition.

EDIT: Don't want to derail arguing over this. Seems a little pointless and off topic.

ardmacha

The Central Bank has marginally downgraded its forecast for economic growth this year in its latest quarterly bulletin.

The bank predicts the economy, as measured by gross domestic product, will expand by 0.9% this year, slightly down on its 1% forecast in January.

Gross national product, or GNP - which excludes profits made here but transferred abroad by multi-nationals - will be flat this year compared with 2010, the Central Bank said.

Consumer spending, which accounts for two-thirds of economic output in Ireland, is forecast to drop further in 2011 by 2.2% after a 3.4% decline last year.

The Central Bank also predicts that wages will remain under pressure with an average drop in pay of 0.3% for employees other than those in the agricultural sector.

The unemployment rate is expected to average 14.3% for the rest of the year having peaked at 14.7%, according to the latest quarterly national household statistics. The Central Bank expects employment growth to resume next year.

gurramok

K-9 wrote: »

Whether I like it or not? I'm pointing out to you, that cutting to 03 expenditure levels will means tax revenues dropping to say 00 levels. The only reason we aren't at 00 levels of tax revenues is considerable tax rises and cuts to credits.

We either borrow to pay for current expenditure levels, impose massive tax hikes to pay for it or do both. Sadly, the first option is too expensive(IMF). The 2nd option will lead to further drops in tax revenues so the cuts have to come, the re-adjustment(aka pain) should be done now, the economy will then pick up after that through strategic investments. If nothing is done, there will be no substantive recovery for many years.

K-9

gurramok wrote: »

We either borrow to pay for current expenditure levels, impose massive tax hikes to pay for it or do both. Sadly, the first option is too expensive(IMF). The 2nd option will lead to further drops in tax revenues so the cuts have to come, the re-adjustment(aka pain) should be done now, the economy will then pick up after that through strategic investments. If nothing is done, there will be no substantive recovery for many years.

Yeah, don't think I've argued otherwise but people shouldn't be surprised when growth drops and we enter recession again or even a depression. Their seems to be some who argue for cuts which I agree with and then get amazed when growth drops and say cut again as if it will solve the growth figures magically!

Either way, we are in for a long period of little or even negative growth.

Idbatterim

Its amazing that this country survived in 2003 when current budget spending was a mere 28 billion as opposed to the whopping 50 billion in 2010.

But life back here in 03 was savage! I remember what it was like not to have 2/3 cars in drive, multiple holidays per year, few flat screen tvs, having to walk hours to nearest water well, q for hours at soup kitchens... If we simply put back everything at the rate is was at in 03, Id be happy with that!