ESRI Quarterly Commentary

The executive summary of the ESRI’s latest Quarterly Economic Commentary is available here.

9 replies on “ESRI Quarterly Commentary”

Not much Xmas cheer from the ESRI, but they can only call what their data and analysis are telling them. What I find worrying is the collapse in investment, the escalation of the debt/GDP ratio and the projected net outward migration. And I’m not sure, from the summary data – though I expect to be put right, whether or not the projected Exchequer balance for 2010 includes full provision (insofar as it can be known) for the expected bank recap.

We seem to be tasting the bitter fruits of a failure of both democratic governance and the exercise of this governance. And, as a result of these continuing failures, resources and policy levers at the disposal of the state that could begin to transform the situation remain undeployed.

Paul — the answer is no.

The QEC says: However, there remains uncertainty over the capital needs of the banks post-NAMA and whether these needs will be met by private sources.

Lending to Irish banks, by the Irish Central Bank, funded by the ECB, peaked at over €130 billion in June 2009, up from €88 billion in December 2008. This was equivalent to over 21 per cent of total Euro system lending to institutions in the Euro Area, up significantly from an average of 6 per cent in 2007.

Joyeux Noël!!


Many thanks. And a Happy Xmas to you – which, I suspect, you’ll enjoy in warmer climes.

I also suspect that the interest of “private sources” will be restrained until they see the shape of the banks once the dodgy loans have been transferred to NAMA. In the light of Philip Lane’s latest post on the CSO’s capital stock publication is there any possibility that the penny will drop with the Government that it will prove impossible to recap sufficiently the covered banks while tieing up so much equity in other state-owned assets?

I’m afraid that the rather derisory response on this thread highlights what is going wrong with this site. Morgan Kelly makes his by-now-traditional quarterly statement, predicting doom, gloom, economic collapse, and so on, ad nauseum, and within a few hours there are 59 posts in response.

In contrast, ESRI are the foremost economic research organisation in the country. They have produced a far more balanced analysis and set of forecasts, and 4 days later there are 3 posts in response. Absolutely no discussion whatever of the actual analysis or forecasts contained in the ESRI report. Even allowing for Christmas, this is rather pathetic. For the record, the main highlights of the latest ESRI forecasts are as follows:

their forecast for the fall in GDP in 2010 has been revised from -2.3% in June last, to -1.1% in September last, to just -0.25% now – many private forecasts are now predicting GDP growth in 2010

their forecast implies a rise in productivity of 3.8% in 2010 and a fall in unit wage costs of -6.3% in 2020 – as unit wage costs are rising by 4% to 5% in other EU countries, this implies a further large increase in wage cost competitiveness in 2010 on top of that achieved in 2009

they forecast the balance-of-payments moving into surplus in 2010

they forecast the exchequer deficit falling from 25,261 billion euros in 2009 to 18,161 billion euros in 2010 – no repeat then in 2010 about whether the deficit is heading towards 30 billion

they forecast the general government deficit falling from 19,260 billion euros in 2009 to 18,560 billion euros in 2010 – some months ago there was a debate on the site as to whether the exchequer deficit or the general government deficit was the more important – for 2010 the debate will be academic as they are almost identical

It would be nice if there was some discussion of the ESRI forecasts on the site. However, it is increasingly the case that the only forecasts which generate any sort of response here are those which forecast economic armageddon.


The best t-shirt slogan I’ve encountered recently is “Armageddon was yesterday; today we have a problem”. Ireland will muddle through. No question of that not happening. A number of things were done right in the last 20 years that provided opportunities and expanded human capital. There are enough people with the resilience to ride this out. All this will help to get us through the impacts of largely self-inflicted damage.

The question, as always, relates to the nature of the “muddling”. Will it be accompanied and determined by decisive and comprehensive reform of democratic governance and the formulation and implementation of policy or will it be characterised by sticking plasters and the crossing of fingers that there will be a rapid return to “business-as-usual”?

As a postscipt on 2009, it looks like Ireland and Finland are in a slow bicycle race to have the largest yoy decline in GDP. A mid-year surge (or whatever the opposite to surge is) might see Finland come out as ‘winners’.

@Ronnie O’Toole

Finland is in pole position. It depends on the fourth quarter. But, if both economies recorded no change in GDP in the fourth quarter, the full-year falls in GDP would be 6.8% for Ireland and 7.6% for Finland. Of course, some of the eastern European economies have recorded larger falls.

Talking of pole position, it looks as if you are in pole position for the most accurate GDP forecast for Ireland in 2009. If I’m not mistaken, a few months ago NIB forecast a fall in GDP for Ireland in 2009 of 7.1%, which now looks as if it will be very close. What is NIB’s latest forecast for 2010?

In relation to forecasting generally, the Ireland and Finland figures show how silly it is to take forecasts by international organisations in any way seriously, yet these are always presented by the media as if they were infallible predictions of what is going to occur. Back in February/March, the OECD forecast that Ireland’s GDP would fall by 9.3% in 2009 and that Finland’s GDP would fall by just 1%. Yet, it now looks as if Finland’s GDP fall in 2009 will be larger than Ireland’s. I trust this lesson will be learned in 2010.


The forecast since the summer has been -7%, which still looks around right. BTW, the Danske Bank forecast for Finland in 2009 (NIB is part of Danske) is -7.2%. When I was talking about the race I meant among eurozone members, though as you say in the wider EU there have been larger falls.

I will be watching Finland with interest. Two countries with the same (approx) GDP fall, one almost entirely because of domestic demand with exports defying gravity, the other because of an export collapse, with domestic demand defying gravity. While a collapse in domestic demand is more painful, the money is still there (i.e. a very high savings rate) and consumption and investment will ultimately resume.

It is not certain by any means whether the investment-goods oirentated economies like Finland will re-win sales it has lost, and they may be in for a challenging few years.

Thanks. They say that Budget 2010 will be regressive. Is that based on the tax-benefit model (simulation) like Tim Callan did analyze it in the years before?

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