The State of the Public Finances

Much of this morning’s media coverage of the latest ESRI Quarterly Economic Commentary (summary here) has focused on the ESRI’s projection that the 2010 general government balance will be a deficit of 19.75 percent of GDP, which is the sum of the ‘underlying’ deficit of 11.5 percent of GDP and the capital transfer into Anglo/INBS of 8.25 percent of GDP.  (Based on the reasonable assumption that Eurostat will adjudicate that the infusions into these banks indeed are capital transfers rather than financial investments.)

This is not really a surprise –  the scale of the bank bailout was announced back in April and the accounting issues were dealt with on this site at that time (see here and here).  In terms of investor sentiment, the bad news should have been incorporated at that time.  Sophisticated investors will understand the distinction between non-recurrent capital transfers and the underlying deficit and also the distinction between accrued liabilities and this year’s funding needs (the use of promissory notes limits the extra funds required this year).

However, beyond the accounting issues, the increase in the government’s liabilities remains a substantial economic and financial cost.  In terms of the trajectory for the public finances,  debt sustainability requires that an increase in liabilities is met over time with a higher primary surplus  – the government will need to raise more taxes and/or cut spending to service the extra liabilities (unless serendipity means that the extra liabilities coincide with a matching upward revision in the forecast for GDP growth).

The next version of the government’s multi-year fiscal framework will need to specify how the opposing forces of the improvement in GDP forecasts and the increase in debt liabilities feed into plans for taxes and spending.

50 thoughts on “The State of the Public Finances”

  1. Does anyone know what the ESRI mean by the following:

    “This expected fall in the rate of unemployment is related in part to expected migratory outflows – 70,000 in the year ending April 2010 and 50,000 in the year ending April 2011. ”

    Is a “migratory outflow” = emigration – immigration? Or is a “migratory outflow” emigration only?

    According to the CSO 63,000 people emigrated in the year to April 2009 (57,000 immigrated which made the net a 6,000 outflow). If “migratory outflow” means emigration only are the ESRI saying that emigration has only risen 7,000 from 63,000 in 2009 to 70,000 in 2010. Looks very, very low based on what I’ve seen in my own neck of the woods.

  2. @ Jagdip Singh

    It is a net figure. They estimate the gross outflow at 80,000 (2010) and 60,000 (2011) and inflow at 10,000 for both 2010 and 2011.

  3. So births of 75,000 and deaths of 25,000 so natural growth of 50,000 and then 70,000 net leave so our population reduces by 20,000 this year.

    At 2.75 per home, that’s 7000 LESS homes we need (we’re building 7-14k depending on who you believe and we have an overhang of 35-350k).

    And now for the great joke. Under the NAMA LEV Regs, they can’t take on board any analysis produced after 10th January, 2010 and remember before that the ESRI and CSO were predicting a nice increase in the population.

    So NAMA are predicting demand (and consequently LEV prices) based on dud information. Brilliant.

  4. “In terms of investor sentiment, the bad news should have been incorporated at that time. Sophisticated investors will understand the distinction between non-recurrent capital transfers and the underlying deficit and also the distinction between accrued liabilities and this year’s funding needs (the use of promissory notes limits the extra funds required this year).”

    The worry is that most investors aren’t all that sophisticated, or that those who are sophisiticated act as if others are not.

    Bearing that in mind, did the ESRI stuff this up by not getting this out in the open, explained and dealt with long before now?

  5. Jagdip Singh

    You are not quite correct.

    The CSO do not make predictions about population growth or anything else. Their job is to report what HAS happened, not predict what WILL happen.

    ESRI predicted net emigration of 50k in the year to April 2009. The final outcome in the year to April 2009 was net emigration of 7k. ESRI overestimated net emigration in that year by 43k. Paul The Octopus would have done better.

    The figure for the year to April 2010 will be a lot higher than for the year to April 2009, but there is no indication that it will be anything like 70k.

    What is called net emigration currently is not net emigration at all in the old sense of young Irish nationals heading off to London, but simply flows of foreign nationals. During the recession, CSO figures show virtually zero net emigration of Irish nationals. All the changes have been in flows of foreign nationals. During the recession the number of foreign nationals leaving increased and the number of new arrivals of foreign nationals fell. But, in the past six months, the fall in the number of foreign nationals arriving has clearly begun to bottom out. As I gave in another thread, the PPSN numbers in 2009 and 2010 so far are as follows:

    Jan 09: 17,532 – Jan 10: 13,470 – y-o-y fall: -23.2 per cent
    Feb 09: 14,377 – Feb 10: 11,837 – y-o-y fall: -17.7 per cent
    Mar 09: 15,204 – Mar 10: 13,083 – y-o-y fall: -14.0 per cent
    Apr 09: 13,585 – Apr 10: 12,125 – y-o-y fall: -10.7 per cent
    May 09: 13,493 – May 10: 12,497 – y-o-y fall: -7.4 per cent
    Jun 09: 14,230 – Jun 10: 13,375 – y-o-y fall: -6.0 per cent

    People should beware of long-term forecasts for population and migration in Ireland. They’ve always been wrong in the past. In the early 60s, a report predicted that the population of the Republic of Ireland would be lower than that of Northern Ireland by the turn of the century. It caused my father, who was running for the local council as a republican in a mainly unionist area in Tyrone, no end of embarassment. Turned out to be hogwash. In 1990, a report by Davy Kelleher McCarthy (its still on IT archive) predicted that the population of the Republic of Ireland would fall from 3.5 million in 1990 to 3.3 million in 2011. The inadequate infrastructure we had in the late 1990s was largely based on politicians and planners believing that report. Turned out to be hogwash.

    In a country with such a large foreign national population, migratory flows can change at the speed of light. It is foolish to assume that, because more foreign nationals left than arrived at the bottom of the recession, that this will continue to occur when the Irish economy is once again growing at well above the EU average. The PPSN figures above are probably the first sign of this.

  6. @John the Optomist

    “The CSO do not make predictions about population growth or anything else.”

    I really wish you were right. However this report from the CSO in December 2008 does exactly that.

    http://www.cso.ie/releasespublications/reg_pop_projections.htm

    It predicts population growth using two migration scenarios – one zero and one massive inward migration. The significance of this projection is that it was adopted by the DoEHLG and has also been used as the basis for the recent regional development guidelines. NAMA are also using it to forecast housing demand by region. And NAMA are not allowed use the analysis from today’s report because it was produced post 10/1/10.

  7. As per Jagdip’s post:

    NATIONAL ASSET MANAGEMENT AGENCY (DETERMINATION OF LONG-TERM ECONOMIC VALUE OF PROPERTY AND BANK ASSETS) REGULATIONS 2010
    ….
    5. (1) The adjustment factor for land located in the State shall be derived by NAMA in accordance with these Regulations in such manner as it thinks fit, by reference to such of the following as it considers relevant:
    ….
    (b) the correlation, in the relevant period, as determined by NAMA in accordance with paragraph (2)—
    (i) between land prices and demographic variables relating to the State,
    ….

    (c) projections of land prices, demographic variables, interest rates, other relevant variables and the State’s gross domestic product referable to any period or periods that end on a day or days not later than 7 years after the valuation date, which are made by the bodies mentioned in paragraph (2) and which were made available to NAMA on or after 21 December 2009 but not later than 10 January 2010; and

    (d) data and analyses referred to in the following sub-subparagraphs, which were provided to NAMA by the persons specified in those subsubparagraphs on or after 21 December 2009 but not later than 10 January 2010:

    (i) data and analyses on the extent to which existing land zoning and planning permissions granted and in force meet or exceed projected growth requirements in the State, which are provided by the Minister for the Environment, Heritage and Local
    Government;

  8. @Jagdip
    “The significance of this projection is that it was adopted by the DoEHLG and has also been used as the basis for the recent regional development guidelines. ”

    In what sense has it been ‘adopted’ by DoEHLG?
    CSO projections for population are carried out following each census and illustrate six combinations of fertility and migration assumptions (2*3).

    For 2020 these yielded a range of possible values 4.66m to a whisker under 6m. More recent OECD projections (which go out to 2050) project 4.77m.

  9. @Jagdip Singh

    No, Jagdip, the CSO figures are not forecasts, they are projections, based on various assumptions. As I’m not the world’s best wordsmith, I find it a touch difficult to explain. But, compare the CSO figures with ESRI’s.

    The ESRI figures are indeed predictions. They are saying that this is what they think will happen. So, they forecast net emigration of 50k in year to April 2009, 70k in year to April 2010, 50k in year to April 2011. We allready know the 2009 forecast was totally wrong (actual figure was 7k). We have to wait and see about 2010 and 2011. But, the 2009 outcome shows that you shouldn’t treat their predictions as gospel truth.

    In contrast, the CSO figures are projections based on various assumptions, but they make no predictions about which assumptions will actually occur. Its purely a statistical exercise. So, they say:

    IF birth rate is X1 and migration is Y1, population will increase by Z1.
    IF birth rate is X2 and migration is Y2, population will increase by Z2.
    IF birth rate is X2 and migration is Y3, population will increase by Z3.

    and so on,

    but without attempting to predict which of X1, X2, X3, Y1, Y2, Y3 will occur. It is not their job to predict that.

    The only analogy I can think of might be at an election.

    One pundit comes on tv and says: FG will win 70 seats – that’s his prediction.

    Another pundit comes on tv and says: if there is a 1% swing to FG, FG will have 60 seats – if 2% swing to FG, FG will have 64 seats – if 3% swing to FG, FG will have 68 seats and so on, but without trying to predict what the actual swing will be. In this case, its not a prediction, simply a statistical calculation of the outcomes that will occur for different assumptions about the variables that affect the outcome, but without trying to predict which of those assumptions will occur. That’s what the CSO projections are like. It is important for the integrity of the CSO to note that they are not in the business of predicting or forecasting.

  10. @George,

    I submitted a reply but because it has lots of links to current regional planning guidelines it needs be moderated. Hopefully this one with one link will be published immediately.

    By “adopt” I mean the DoEHLG issued draft regional planning guidelines in March 2010 which used the pop projections (or estimates) produced by CSO in Dec 2008. An example is here for Dublin

    http://www.spggda.ie/documents/RPGDraftforPublicDisplay.pdf

    So the DoEHLG told the regions to plan for populations based on the upper and lower pops produced by the CSO in Dec 2008. That’s what I mean by adopt.

  11. We could continue to argue until the cows come home about future population and net emigration trends, but one thing, I think, we can be sure of is that younger people with the skills, gumption and employment prospects abroad will not hang around indefinitely. However, in the context of Philip’s initial post on the public finances, the Government’s decision:
    http://www.finance.gov.ie/viewdoc.asp?DocID=6374&CatID=1&StartDate=1+January+2010&m=n
    to order the Committee on Finance and the Public Service to produce, by end Oct., a report on the macroeconomic policy issues arising from the Regling/Watson Report is an interesting development.

    Given that (a) the medium-term trajectory of public finances will be determined in the real Irish Office of Budgetary Responsibility located in DG ECFIN in Brussels, (b) the extent and timing of capital transfers into Anglo/INBS will be determined by DG COMP (with DG ECFIN, presumably, looking over its shoulder), (c) any requirement for publicly-funded recapitalisation of AIB & BoI will emerge from the EU bank sector stress tests (d) the Croke Park agreement imposes fiscal constraints and (e) the Government appears to have dismissed the possibility of introducing a property tax or water charges in the near term, it appears that the Government’s room for manoeuvre is almost negligible.

    Apart from more cuts and taxes on the old relaibles, all that’s left is spin, token gestures (e.g., the innovation hub) and fingers crossed that something will turn up.

    While it is welcome that an Oireachtas Cttee is being charged to scrutinise and to advance proposals on macroeconomic policy issues, it begs the question: what will this achieve? Even if something sensible emerges, there is no means of ensuring it will have an impact on future Government policy.

  12. @John the Optomist,

    Understood what you say but the projections by the CSO only use neutral or positive net inward migration scenarios. That they didn’t even CONSIDER net outward migration seems incompetent.

    Remember, net inward migration was 450k between 1994 – 2008 (the Boom era). Isn’t it just POSSIBLE that we might have net outward migration for some time to come? Obviously it is possible but CSO ignored the possibility completely. And by omitting that possibility I would say that their projections are forecasts because they have consciously excluded one possibility and yet present the overall document as an assessment of max and min population.

    Noted about the accuracy of the ESRI, it’s just that a 70k net outward migration in 2010 chimes in with admittedly anecdotal personal experience and it seems with those I know.

  13. Whether they are projections or forecasts what is important is that govt agencies and depts will use them for planning purposes unless told otherwise.
    In fairness to CSO they convene a committee of wise heads to consult on the scenarios chosen (incl at least two of this parish) and the scenarios would have been agreed some time in 2007. ESRI MTR published after the CSO publication in May of 2008 still expected net inward movements in all years to 2015 in its benchmark forecast.
    The M0 scenario was only included in the publication ‘to allow a full assessment of the impact of migration to be made’

  14. @George

    Fair enough. Though as we speak today, NAMA have another €65bn of loans to be valued and transferred. About 60% are for assets in the State. NAMA are using (and must use) projections which are completely at odds with the 2-year forecast from the ESRI this morning. NAMA’s projections will therefore be for fairly major growth (up to 6m in the State by 2026) which would swallow up all those empties and place a floor under prices at a certain supply:demand level. That demand level looks far too strong (with the implication that the LEV of residential property assets in the State will be overvalued) by reference to the ESRI forecast today. That’s my concern.

  15. @George
    “For 2020 these yielded a range of possible values 4.66m to a whisker under 6m. More recent OECD projections (which go out to 2050) project 4.77m.”
    Not sure what OECD projection you are looking at, do you have a link?

    Anyway, my previous limited experience has been that external agencies use the CSO ‘projections’ to come up with their figures. If the CSO figures are skewed one way or another by recent experience (the trend is your friend…) then everyone else’s are too.

  16. @George
    Thanks for the link. From the OECD site (click on the red ‘i’ next to the “Total Population” header).
    “Population projections are taken from national sources where these are available, but for some countries they are based on UN or Eurostat projections; the projection for the world comes from UN. All population projections require assumptions about future trends in life expectancy, fertility rates and migration. Often, a range of projections is produced using different assumptions about these future trends. The estimates shown here correspond to the median or central variant.”

    So they use CSO or Eurostat or UN (both of the last two use CSO, I believe) and then come up with some magical numbers themselves. The CSO therefore sets the possible range and the OECD picks a number in the middle.

    Rocket-science stuff…

  17. Even though the bank recapitalization money is “old” news” the market has still reacted negatively.

    Irish bond spreads are up 12bps as against the rest of the PIIGS who are all up less than 5bps

  18. @ Paul Hunt You say ‘The government appears to have dismissed the possibility of introducing a property tax or water charges in the near term, it appears that the Government’s room for manoeuvre is almost negligible.’

    What I don’t understand about property tax – and we’re told that economists ‘love’ them (whatever that means) is that at the end of the day ALL tax is income tax. Now I agree that if the government has to raise revenue then it’s better done through a property tax or – better still – a land tax than through income tax and VAT. But as I understand it economists ‘like’ property taxes because they prefer them to other forms of tax.

    What the government was ‘contemplating’ was an extra tax – on top of all the other taxes they have heaped on middle and upper income earners. Ditto for widening the tax band. This will be more money paid by people who are already paying over 50% effective tax (not even trying to calculate how much VAT they pay).

    What’s my point? You say that the ‘room for manoeuvre is almost negligible’. Meanwhile the ESB (the least competitive and most inefficient power generator in Europe) goes on an acquisition spree to hoover up potential competitors North of the Border. The Croke Park deal insulates the public sector from taking more pain; the senior civil servants take no pain and D4 is in receipt of more corporate / consultancy / advisor welfare (via NAMA etc) than the rest of the social welfare recipients of the county put together……the bond holders of Anglo are fully paid……Oh…er…..it’s just so difficult to know what to suggest isn’t it?

  19. @JTO

    To be 100% accurate, the ESRI migration estimate related (I think) to working age pop, while the CSO stats refer to total pop. One of the truely odd features of the migration data is the migration of children, which was positive (+5k) to Ireland in the year to April 2009. For some reason, families with young children don’t emigrate from Ireland, but do immigrate into Ireland. As such, net migration for this cohort was positive in the year to April 2009, to add to the very strong growth in the size of this population due to natural increase.

    Go figure.

  20. @Paul MacDonnell,

    I’m suggesting the Government’s room for manoeuvre is almost negligible because of the political calculation it has made. But, since we don’t do ‘politics’ here, I left it at that. Jean-Claude Juncker, Luxembourg’s PM, is reported to have said in 2007: “We all know what to do; what we don’t know is how we can get re-elected if we do it”. The Government is simply hanging on, trying to stabilise the situation (subject to EU oversight), hoping for some external up-lift for the economy and seeking to do the least possible damage to its core vote. That is the best it can hope for – and to leave the heavy-lifting to an incoming government which it can attack opportunisticly from the opposition benches.

    There is international evidence, some provided by Rogoff and Reinhart and others, that economies which are compelled to pursue severe fiscal retrenchment – as Ireland is – can counteract the malign economic impact – and faciliate more rapid recovery – by pursuing some fundamental structural reform at the micro-level. (Philip Lane, and others in this parish, has consistently made the case.)

    In your last paragraph you highlight some sectors that are prime candidates, but the political landscape prevents any possibility of accumulating and securing the popular plurality required to pursue the required reforms. There is no possibility that the current Government could secure the necessary popular consent – or would even contemplate trying to secure it; and the most likely, incoming alternative will be trying to retain the support of voters across the political spectrum (from small government, low tax advocates to big government, high tax and spend advocates) that it will prove impossible to muster the popular consent to implement the reforms required.

    Compared to other developed economies, Ireland is doubly cursed – a political landscape that splits the, perhaps majority, centre and right of centre constituency between two ‘catch-all’ parties and the exercise of extreme executive dominance with governments prone to capture by vested interests.

    And there seems little prospect that we will escape from either curse.

  21. @Ronnie
    It’s not really that tricky – if you have young (school-age) children, you are less likely to leave schools – the adjustment for children may be more difficult than for adults – going to a completely different system, the inability to study Irish abroad to exam level, hence the near-impossibility of short-term return (anyone want to look at the effects of mandatory and points-bonus Irish on access levels to third level? Or the lack of europe-wide examinations as a disincentive to population migration?).

    On the other hand, childless couples who do go abroad, know the same truism about returning to Ireland part way through their child’s education. The result being that once they have children they have to decide whether they will come back before school age or not at all.

  22. @ hoganmahew

    It is really that tricky! Why is immigration of children so high in recent years? Surely all the factors you mentioned should be working as well on French, Czech, Polish families etc? Why do people with young children immigrate to Ireland, given the disruption for their kids?

  23. @Paul Hunt You are more or less right – except – ‘There is no possibility that the current Government could secure the necessary popular consent’. This I’m not so sure about. A government taking on the ESB unions is not the same as a government withdrawing funding for respite care – the latter they will do but not the former. This is because the government governs on behalf of vested interests – i.e. senior bankers, unions and the professions.

    Also this government NEVER has got popular consent for anything. What they do is consult the ‘social partners’ and pretend that that’s the same thing ( you know that it’s not and why it’s not, right?).

    The government / establishment strategy in this crisis is, as it was in the 1980s, to protect ITSELF from the consequences of its mismanagement of resources and hope that either a) the world economy rescues them or b) the unemployed bugger off to another country. But they intend to hang in there.

    In a country used to periodically losing half of its young population in periodic economic implosions it doesn’t make much sense to talk about ‘popular consent’. Social partnership mimics popular consent but it ain’t the wisdom of crowds – especially seeing as so much of the crowd is simply fodder cluttering up an unlevel economic playing field.

  24. @Ronnie
    “Surely all the factors you mentioned should be working as well on French, Czech, Polish families etc? Why do people with young children immigrate to Ireland, given the disruption for their kids?”
    I presume because they feel they can keep their language skills current for their children and slot back into the education system at home more easily than one can slot back in here. The state provides language support for foreign children to learn english (and rightly so). It doesn’t provide language support for returning Irish children to catch up on the Irish they have missed.

    Having native english speaking children is seen as a boon by other nationalities. We (the Irish) do not value other language teaching nearly so highly; we will almost universally seek out english-language schools where we do school our children abroad. Others have fewer fears. Perhaps?

    There may be an element of catch-up with the immigration figures – where one member of the family had moved to Ireland and is now settled, the rest of the family are now following?

    Finally, there always comes a point where the economics of emigrating outweigh the economics of staying put regardless of children. I know that was the point that my parents discussed with us when we moved from Ireland in the 1980s. By then, though, many others had left. Families will lag as they have more perceived ties; if emigration becomes endemic, I expect we’ll see more of the families moving away.

  25. @Paul MacD,

    Agreed. All that changes in the broader policy and decision-making process after a general election is the identity of ministers and special advisers. And very soon these are captured. But, perhaps, enough contemplation of politics – it is recipe for despair.

  26. @Michael Hennigan

    The IMF is forecasting Irish GNP % growth of 1.8, 1.6, 2.4, 2.5 and 2.5 for 2011-2015. I always felt given the extent of the global recession and the steep fall of the Irish economy, the ESRI’s recovery scenarios were too rosy.

    The IMF are clearly out-of-date. On your own website you give the figures that the IMF quote for other forecasting organisations’ predictions for GDP growth in 2010, from which they (IMF) calculate a consensus (or average) forecast.

    http://www.finfacts.ie/irishfinancenews/article_1020145.shtml

    The IMF report gives a figure of -1.3% for the Dept of Finance’s forecast for GDP growth in 2010. But, the Dept of Finance revised their forecast up to +1.0% GDP growth in 2010 last week.

    The IMF report gives a figure of -0.5% for ESRI’s forecast for GDP growth in 2010. But, ESRI revised their forecast up to +0.3% GDP growth in 2010 today.

    All forecasts for GDP growth in Ireland 2010, that have been published since the 2010 Q1 GDP figures were released by the CSO last month, are for positive GDP growth in 2010, ranging from ESRI’s +0.3% to Goodbody’s +1.5%. My own forecast is much higher, but leave that aside. The IMF are simply lagging a couple of months behind.

  27. @Michael Hennigan
    “The IMF is forecasting Irish GNP % growth of 1.8, 1.6, 2.4, 2.5 and 2.5 for 2011-2015.”

    Is that significantly below the projections on which the budget is based?

  28. @ Dreaded_Estate & Michael Hennigan

    The IMF Unemployment projections in the same report have the jobless rate dropping to 9.5% by 2015, so a 4% reduction with quite ‘low-growth’ assumptions, which would imply a very low Okun’s Ratio i.e. of the order of 2:1 (a +2% rise in output = -1% reduction in jobless). It took 8 years of Celtic-Tiger growth between 1994-2000 to get irish unemployment down from 14% to 4%. This would suggest a much higher ratio between output & employment.

    @ Philip Lane

    The IMF report released today estimates that “Current Transfers” (which presumably includes social welfare transfers – the Lion’s share) will only moderate from EUR 18 billion to EUR 16 billion over the next 5-year period, due to the persistently high jobless rate. Presumably as you say above sophisticated investors will understand the difference between one-off capital transfers and recurring government expenditure. Surely with such fiscal drag expected we’re in danger of entering an economic Catch-22 where the output gap remains persistently large cos’ of the jobless recovery, yet we need growth to reduce unemployment, whilst the forecast growth is anaemic by historic standards & not enough to reduce joblessness quickly.

    So my question to you is: do you see an upward revision in GDP growth? And what in your opinion would be appropriate trend growth?

  29. @Ronnie O’Toole

    To be 100% accurate, the ESRI migration estimate related (I think) to working age pop, while the CSO stats refer to total pop.

    Thanks for that information. I couldn’t actually find anything in their reports where they said that their forecast related to the population of working age only. But, as you know much more about it than I do, I’m sure that what you say is correct. Even so, it would still leave their net emigration prediction for the year to April 2009 massively out. Taking your figure of 5k for net immigration of children into account, that would leave net emigration among the population of working age only at 12.8k in the year to April 2009 (all of them foreign nationals), rather than the 50k ESRI had predicted.

    Its beginning to look as though their prediction for the year to April 2010 may have a similar error of magnitude. Until the final figures are published, the best estimates are derived from the QNHS series, which gives quarterly estimates of the population aged 15 plus. This time last year there was a heated debate on this site about the level of net emigration in the year to April 2009. Those of us who based their estimates on the QNHS series got it exactly right (I was one, you were another, Colm McCarthy was another). Some others, such as Progressive Economy, based their estimates on mobile phone traffic and got it totally wrong. They estimated net emigration at 200k in the year to April 2009. The actual figure, when published in September 2009, turned out to be 7.8k (all of them foreign nationals). There was zero net emigration among Irish nationals. Bearing this in mind, it might be useful to look at the latest QNHS figures:

    Irish nationals aged 15 plus:

    2008 Q1 3036.6
    2008 Q2 3035.7
    2008 Q3 3035.2
    2008 Q4 3069.5
    2009 Q1 3069.2 – y-o-y change: +32.6
    2009 Q2 3079.0 – y-o-y change: +43.3
    2009 Q3 3093.4 – y-o-y change: +41.2
    2009 Q4 3096.1 – y-o-y change: +26.6
    2010 Q1 3113.3 – y-o-y change: +44.1

    Foreign nationals aged 15 plus:

    2008 Q1 483.1
    2008 Q2 479.3
    2008 Q3 477.6
    2008 Q4 464.4
    2009 Q1 462.3 – y-o-y change: -20.8
    2009 Q2 444.8 – y-o-y change: -34.5
    2009 Q3 432.8 – y-o-y change: -44.8
    2009 Q4 422.9 – y-o-y change: -41.5
    2010 Q1 402.7 – y-o-y change: -59.6

    total population aged 15 plus:

    2008 Q1 3519.7
    2008 Q2 3514.9
    2008 Q3 3529.7
    2008 Q4 3533.9
    2009 Q1 3531.5 – y-o-y change: +11.8
    2009 Q2 3523.8 – y-o-y change: +8.9
    2009 Q3 3526.2 – y-o-y change: -3.5
    2009 Q4 3521.0 – y-o-y change: -12.9
    2010 Q1 3516.0 – y-o-y change: -15.5

    We can attempt to make crude estimates of migration trends from these figures.

    (a) The total population aged 15 plus figure was 24.4 worse in the year to 2010 Q1 than in 2009 Q2 (a fall of 15.5k compared with a rise of 8.9k). As the CSO estimated net emigration at 7.8k in the year to April 2009, that would leave net emigration at 32.2k in the year to Feb 2010, if other factors such as birth rate in mid 90s, death rate in 2009/10, migration among children etc remained the same. They are unlikely to have changed much within a year. This is a long way short of the ESRI forcast of 70k. One caveat is that these figures are for the year to 2010 Q1 (mid-point: Feb 2010), while the final migration figures, when published later in the year, will be for the year to April 2010. So, for the ESRI forecast of 70k net emigration in the year to April 2010 to come true, there will have had to be a massive deterioration between February 2010 and April 2010.

    (b) All of this net emigration was among foreign nationals. The y-o-y increase in the number of Irish nationals aged 15 plus in 2010 Q1 was 44.1k, compared with 43.3k in 2009 Q2, when the CSO estimated net emigration among Irish nationals at zero. In fact, the y-o-y increase in the number of Irish nationals in 2010 Q1 was the highest since the CSO began this series. This is in line with an EU survey published yesterday, which stated that the Irish were the least likely in the EU to be considering emigrating (available on the Irish Examiner website).

    The fact that Ireland has gone through this recession, and back into resumed growth, with a total absence so far of any resumption of net emigration among its own nationals is one of the most striking features of the recession, but one which has been totally ignored by the media and by most economists. Do they never ask themselves ‘why?’. I would suggest that it might be related to the following: (a) unemployment benefit in Ireland is now twice that in the UK, while in the 1980s it was half (b) the proportion of the population in Ireland in employment is still higher, despite the recent fall, than the EU average, while in the 1980s it was one-third lower (c) GNI per capita in Ireland is still higher, despite the recent fall, than the EU15 average, while in the 1980s it was one-quarter lower.

  30. @JTO

    a) Good to have you back.

    b) The natural increase in the >15 population is running at around 30,000, if you take the CSO projections for 2011-2016 M0 assumption. We can safely assume this is mostly Irish natives, as new entrants to >15 cohort (i.e. aged 14) are overwhelmingly Irish given the 20s/30s age profile of foreign migrants as per 2006 census. Roughly then, the 44k growth you rightly say in the native popuylation is possibly 30k natural, and 14k net inward migration of Irish natives. The emigration figure of 46k is then 60k due overseas. This is not an assumption based on perfect data, though it is at least very possible that net immigration continues among the native Irish.

    As for the why, to add to your list:

    Foreigners have of course fared far worse in the labour market though not, as is commonly believed, because they were disproportionately employed in the industries which have contracted the most, such as construction. In every economic sector the fall in employment of foreign workers has been far larger than that of Irish workers.

    For example, employment of Irish natives in the hospitality industry has actually risen by 5% over the last two years, while the employment of foreigners in that industry has fallen by 23%. This might reflect differences in skill levels, employment contracts or union membership. Family owned enterprises, which account for 40% of all employment in local services businesses, might also be playing a role in ‘soaking up’ unemployed Irish family members or wider informal networks.

  31. As far as I can see the ESRI forecasts are for the year 2010 and 2011 rather than for the year up to April 2010. It might also be worth remembering that the QNHS was a good bit out in the 2002 to 2006 period but we won’t find out how it has fared since 2006 until we have the Census 2011 figures. If the net-emigration forecasts are wrong (too high) unemployment will be higher (be careful what you wish for).

    It is peculiar how this post which was entitled “State of the Public Finances” got ‘hijacked’ into “Net-Emigration Forecasts”!

    Surely the big issue is how the probable revision of the budget deficit (for statistical purposes) for 2010 is going to be perceived outside of Ireland.

    The other important point made in the QEC which has not been discussed here is the recommendation to profile the unemployed and to target training, rather than to use the old fashioned employment creation in construction. It is remarkable ho many people and political parties have jumped on the old fashioned construction job creation model which might have worked before WWII in Germany and in the post war era when construction was considerably more labour intensive. Let’s face it – we need fewer construction workers so tying them over through an expensive public construction programme only postpones the inevitable.

  32. @ JTO/Dreaded_Estate

    Forecasts for 2013 to 2015 are of course guesses.

    The ESRI in 2009 forecast GNP growth of 5.9% in the period 2012-2015.

    My expectation from the outset of the recovery was that it would be fragile and the credit-boom growth rates would not appear anytime soon in the advanced economies.

    In the week Cowen is in the US looking for investment, the Fed cuts the growth forecast; policymakers are strugliing to try and cut the jobless total and Obama’s approval rating on the economy falls to Geore W. Bush’s in 2006.

  33. @Ronnie O’Toole

    Brilliant contribution as always. Its very good to know that there are some economists in Ireland who actually bother to study and analyse statistical data properly.

    If I’m reading what you say correctly, you are in agreement with me that so far (and nobody knows the future), but so far, as of now, using the most-up-to-date data (to Q1 2010), there has been ZERO net emigration of Irish nationals since the recession began, possible even a small net inflow, and that ALL the net emigration that has occurred since the recession began is accounted for by foreign nationals going home.

    I wish one of newspapers would give you an opportunity to write an article highlighting this. Because all the articles I’ve read recently in the Irish media (including one yesterday in the Irish Times, and one today in the Irish Independent) take it as fact that Irish nationals are leaving the country in droves, when they aren’t. In addition, as I said above, these figures were supported a survey reported earlier this week which found that fewer people in Ireland were contemplating emigrating than in any other EU country. I’m afraid the latest Flight of The Earls is complete myth (so far, at least).

    http://www.belfasttelegraph.co.uk/breaking-news/uk-ireland/fifth-consider-emigrating-for-job-14876327.html#

  34. Is there a difference in the economic contribution of a foreigner or an Irish?

    Or is the important factor that there might be fewer people in Ireland that could possibly contribute to the Irish economy?

    There is a saving in cost of welfare when foreigners leave. At the same time a huge bet has been placed on that foreigners stay and increase in numbers, otherwise property value will fall and NAMA will make a huge loss.

  35. @JohnTheOptimist – I do know, only anecdotal agreed, that in my dealings this summer with a lot of people in the 18-28 age range, there is plenty of talk of leaving and some have actually gone (Oz, Saudi and USA are three recent ones).

    Regardless of actual data today, it only appears to be pointing one way over the next year or so. Mostly graduates who have recently finished their studies and feel that all that’s on offer are unpaid internships (which is true – one bunch of people I’m close to, 28 of them I think – postgrads/Masters, they are nearly all either working on unpaid internships… with the exception of 3-4 of the females who have paid jobs in shops for the summer). Doesn’t appear to be a lot of good reasons to stick around is the general concensus.

    I’m no expert in how governments ‘massage’ this type of data to make it look more favourable for them (though I would bet they do) but is it possible that many of these people leaving full time education and going away don’t even get ‘on the radar’ if they aren’t working or drawing the dole here and are simply not counted?

  36. p.s. I see Garret Fitzgerald agrees with both of us in the IT this morning – “at some point large-scale emigration is bound to re-emerge as workers tire of waiting for employment opportunities.”

  37. @Joseph
    I’m no expert in how governments ‘massage’ this type of data to make it look more favourable for them (though I would bet they do)

    p.s. I see Garret Fitzgerald agrees with both of us in the IT this morning – “at some point large-scale emigration is bound to re-emerge as workers tire of waiting for employment opportunities.”

    Re Garret Fitzgerald, what you say is correct up to a point. He agrees exactly with me about what HAS happened so far. But, he agrees with your prediction about what WILL happen in the future. However, the two don’t carry equal weight. One is fact, the other is prediction. He has no more insight into the future than you or I.

    An analogy might be as follows.

    Let’s say, just for the sake of argument: you claim that Brazil just won the World Cup, and I counter by saying that no, actually, Spain won it. That’s a dispute about what HAS happened, a dispute about fact. Then, you come along and say “I see that Eamonn Dunphy agrees with both of us, he says in the IT this morning, that while, yes, Spain just won the World Cup, he predicts that Brazil will win it in 2014.” The fact and the prediction are hardly of equal weight.

    Re your claim that the Government has fabricated the population and migration statistics, I’m afraid that this is typical Dublin 4 media paranoia run riot. I predict a glittering career for you in the Irish Times, taking over the Vincent BrowneStuff or Fintan O’Foole column in due course. The Government have nothing whatever to do with compiling the population and migration statistics. They are compiled and published by the CSO, who operate to the highest international standards of objectivity and accuracy. Based on latest opinion polls, I doubt if more than 20pc of CSO staff are FF supporters. The idea that they have fabricated the population and migration statistics to cover up renewed large-scale emigration of Irish nationals is ludicrous beyond belief.

  38. @Scorpio

    As far as I can see the ESRI forecasts are for the year 2010 and 2011 rather than for the year up to April 2010.

    While I agree that it isn’t totally clear which period ESRI are referring to, and there is still a possibility that you are right (why can’t ESRI make such a simple thing clear?), Garret Fitzgerald seems to be in agreement with my interpretation. In this morning’s IT, he writes:

    “THERE IS one respect in which I find the otherwise excellent ESRI Quarterly Commentary unsatisfactory – namely its handling of emigration, which I wrote about in this column last week. It is not clear that when the commentary refers to emigration in 2010 and 2011, the periods in question are the years ended April 2010 and April 2011 – almost 12 months earlier than a reader might be led to believe. The fact is the 50,000 net emigration figure for the 12 months ended April last – which received a lot of media attention – was caused by immigrant workers returning home, in particular I believe, to Poland, which uniquely in Europe had an expanding economy throughout the crisis period. There is no sign of significant emigration by Irish people during that 12-month period.”

    The bottom line re migration in this recession so far (emphasise: so far) is:

    (a) Right up until 2010 Q1, the latest period for which data is available, there has been ZERO net emigration of Irish nationals.

    (b) There has been significant net emigration of foreign nationals returning home, but much less than ESRI forecast (7.8k net outflow of foreign nationals in year to April 2009, compared with ESRI forecast of 50k). The outflow of foreign nationals in the year to April 2010 will be considerably higher but, based on the QNHS figures for Q1, will again be much less than the 70k ESRI forecast.

    These are the facts. All claims to the contrary are media sensationalism.

  39. @JTO – you do (at least) make me smile from time to time. All well and good looking back at the past and going on the facts (which is only right and proper) but I thought that economists were meant to be able to ‘forecast’ too and understand/predict what the implications of enacted policy might be (it is a still a social science?). That does imply a measure of being able to make an educated guess as to what the future might hold with some degree of ‘probablility’ (educated guess/critical thinking) thrown in?

    As for the IT being my future, I will never get a staff job there. I do my own thing. Currently making a documentary about self-directed careers guidance for young people in Ireland. Fascinating stuff. Talking to them humbles me. They have a tough show at the moment.

    Could you please cut out words like ‘ludicrous’ – I would never chuck that at you. We all have our own opinions. No doubt, some are better informed than others but hey, let’s cut some slack to the guys that are just trying their best to give a voice to those who don’t have one.

    Cheers,

    Joseph

  40. Joseph,

    I do apologise for the use of the word ‘ludicrous’. But, as is clear from the context, I was not using it in relation to your forecasts on migration or any other economic views you may have, but to your claim that somehow the government massaged the migration figures. Such claims are not just attacks on the government, who, as politcians, can well handle it, but on the integrity and objectivity of the CSO. The CSO would never tolerate the government, any government, interfering in the statistics they publish.

  41. This would be the same CSO that (as I recall) includes 16-year-olds when counting the numbers of employed people but excludes them when counting the numbers of unemployed people? That would kind of fit my idea of ‘massaging’!!

  42. @JTO – yes some clarity from the ESRI regarding what period they are talking about would be useful.

    I note that you prefer to ignore the fact that the QNHS numbers were heavily revised after the last Census. In that context, your facts are actually just estimates and time will tell what the real facts will be. The focus on Irish vs. non-national is interesting (are non-nationals second class citizens that don’t matter?), but utterly irrelevant when it comes to determining the unemployment figures.

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