Letters to the Editor
Economic Update of Ireland
By Eamonn McKee
Irish Ambassador to Seoul
It has been some time since I updated you on the current Irish economic situation. The following highlights are drawn from the Department of Finance’s Monthly Bulletin for June: the full report can be read at www.finance.gov.ieTo put these figures in a policy context, our prospects for recovery will be shaped by the continuing debate between the proponents austerity and those of quantitative easing, itself a continuation of a long running debate between the supply-siders and the demand-siders (Keynesians), with deep ideological undertones.While occasionally arcane, it is of the utmost importance. Importantly, it has influenced policy choices. The G8 leaders meeting yesterday and today at Lough Erne in Northern Ireland have said that fiscal policy should allow for near-term flexibility to accommodate various economic conditions: “The pace of fiscal consolidation should be differentiated for our different national economic circumstances.”This is very much in line with Irish Government thinking and it promises a more imaginative and flexible approach to policy choices. The full G8 statement on the global economy is here https://www.gov.uk/government/news/g8-summit-communique-on-global-economy-working-session. I will readily admit that none of the following makes for particularly exciting reading.However, if one considers the economic and financial freefall that affected Ireland with the onset of crisis in 2008, the manifest stabilization and tentative signs of recovery in these figures are encouraging.This has been achieved in a period global recession that has particularly affected our main markets: Some 55% of our total goods exports go to just three markets, namely UK, France and the US: 40% of all our service exports go to three markets – the UK, Germany and the US.Add to this an ongoing crisis in the Eurozone with attendant austerity programs and limitations on US-style quantitative easing, the external trading environment, on which Ireland relies, is particularly challenging.Conversely of course, an improvement in global trading will greatly boost our own recovery. Turning to the key indicators, the Government’s deficit was €5,295 million in May, some €1,235 million lower than this time last year. Tax revenues were up 2.5% and expenditure 6% lower at €17.7bn.The General Government Balance between revenue and expenditure is now -7.6% of GDP, well within our target and on course to reach -3% by 2015. For the second year in a row the economy grew, albeit at a modest 1% but showing resilience considering the flat demand in our main trading partners. Growth projections for this year are in the region of 1.3% and possibly double that in 2014. Exports, particularly services, grew strongly at 8.9% though goods dropped slightly.This was achieved despite the fact that ending of patents is causing a drop in pharmaceutical exports, one of our key products. Domestic demand was still affected by austerity in 2012, with government consumption down.However, after falling consistently since 2007, personal consumption finally got into positive territory in the second half of 2012 at 0.4%. The seasonally adjusted unemployment rate in early 2013 was 13.7%, a decrease from a peak of 15.1% at the start of 2012.Employment at 1.846 million people was up 1.1%. Some 61.8% of total unemployment is now long-term, with the long-term unemployment rate decreasing from 9.5%, to 8.4% over the year. Employment fell in construction (-6.7%) administration and support activities (-4.8%) and public administration and defence. Employment rose more strongly in agriculture, forestry and fishing (+19.5%) and professional, scientific and technical (+6.0%).The property crash in Ireland has been mesmerizing in a horror movie kind of way but it seems that residential property prices are bottoming out at 50% of the 2007 peak with Dublin prices now up 1%.Transactions are up 13% this year, driven in part by cash purchases. Year on year to April, mortgage approvals are up almost 12%. Many years of adjustments lie ahead for home owners and their lenders but if these figures continue on track, it looks like the property crash is coming to a close, or perhaps more accurately an end to the beginning. This stabilization and recovery is critical for recovery in our banking sector and with it the return of credit to fund business and growth.Best wishes,Ambassador’s Message – 18 June 2013
Ambassador of IrelandInquiries can be made through ambassador's secretary's Email. Heejeong.Kim@dfa.ie
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