The Central Bank Economic Out Look at a Glance

 The level of activity in the Irish Economy has continued to contract in 2009. Following an annual rate of decline of 8.4% in the first six months, the pace of gross domestic product is likely to ease in the second half of the year reflecting gradual improvement in external markets which should offset to some extent the continued decline in domestic demand. For 2009, as a whole, the level of gross domestic product is forecast to decline by 7.8% while gross national product is likely to contract by 10.6%.

 The moderation in the rate of decline in output is likely to continue into the first half of 2010 with the prospect of stabilisation followed by some recovery in the second half of 2010. For the year 2010 as a whole the level of gross domestic product and gross national product are projected to decline by 2.3% and 3.1% respectively.

 The main risk to this out look relates to the sustainability of the recent incipient recovery in world demand which remains fragile. A sustained recovery in external markets, should emerge, would support a modest recovery in underlying export growth. In the domestic economy, however the contraction in activity is set to continue through next year with the weak outlook for disposable income weighing on consumer demand and leading indicators pointing to a further decline in fixed investment.

 With the rebalancing in the composition of output likely to have run its course by the end of next year and assuming a resilient recovery in world demand, there is a reasonable prospect of a return to a moderate and balanced expansion in the Irish economy from that point.

 Labour market prospects over the next year are closely linked to the outlook for economic activity. Employment is likely to continue to decline at a moderating pace through the second half of 2009 and much of 2010 with a reasonable prospect of some stability on the level of employment by the end of 2009. Unemployment is likely to average 12% in 2009 arising to an average of 14% in 2010.

 Inflation has declined considerably since 2008. The average rate of inflation, as measured by the Harmonised Index of Consumer Prices (HICP) is forecast to decline to about -1.5% in 2009 while the Consumer Price Index is forecast to decline by 4.2% over the same period.

 Inflationary pressures overall are likely to remain subdued into 2010 as consumer demand continues to contract sharply. Accordingly, inflation in both the Harmonised Index of Consumer Prices (HICP) and Consumer Price Index (CPI) of about – 0.5% and -0.4, respectively, is forecast for 2010. Inflation is forecast to be significantly lower in Ireland than for the euro area indicating a market improvement in the price competitiveness with respect to our main trading partners.

 

Karl Foley

Press Officer
John McCarrick and Associates
11 Dunville Avenue, Rathmines
Telephone:01 4960102
Fax: 01 4973717
Email: info@jmccarrick.com

 

 

 

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