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Central Bank Q3 Bulletin

Available here.  Minor improvement in growth forecast for this year, offset by minor reduction in growth forecast for next year.

As always, the ‘signed articles’ are of special interest

  • Cost Competitiveness and Export Performance of the Irish Economy by Derry O’Brien and John Scally
  • Recent Trends in Irish Expenditure and Prices by Colin Bermingham
  • Analysis of Recent Monetary Operations & TARGET2 Developments  by Patrick Haran and Samuel Bailey

3 replies on “Central Bank Q3 Bulletin”

Each year for the past three years the official forecast has been for consumer spending in the following year to be flat and for growth the be 2%-3%. Then as year end approaches, these forecasts get downgraded or rather simply extended out one more year.

With the new property tax coming as well as increases to excise duty, motor tax and probably a few other indirect taxation sources, it is likely that consumer spending will be negative again in 2013 and that in 12 months time we will be revising down growth estimates for 2014.

Let’s hope I am wrong!

The Bulletin says:

The performance of services exports annually in the first quarter of 2012 proved considerably more buoyant relative to that of the quarter, with a volume increase of 11.9% , almost double that of the previous quarter. Moreover, the first quarter outturn represented the strongest such increase in services export volumes since the final quarter of 2007. Some divergence in services export performance was however evident at a sectoral level during the year to the first quarter of 2012 – – computer services exports accelerated appreciably while the performance of business services exports, Ireland’s second largest services exporting sector, also gathered momentum. These two sectors, when combined, accounted for approximately 87% of services export growth annually in the first quarter of 2012.

This is of course impressive for foreigners and the gullible at home.

The rise in ‘computer services’ reflects the tax strategies of US multinationals involving the booking of fake exports in Ireland and the Irish Central Bank treats it as reflecting Irish economic activity!!

As regards the O’Brien/ Scally paper, foreign multinationals are responsible for 90% of Irish tradeable exports.

My suggestion regarding research on exports is to use for example chemical production data from other developed countries to adjust Irish data – – German has a similar manufacturing labour hour cost to Ireland; the US also publishes wholesale trade data for Ireland that is treated as ‘production’ in Ireland.

As for services, use the revenue and payroll data that is available from the specific MNCs to reduce the ridiculous Irish revenue per employee levels.

Otherwise, researchers would inevitably begin a long journey and end almost back where they started.

The projected GDP figure for 2013 at €168.6 billion is significant. When the 2012 Budget projections were being prepared (just 8 months ago) the GDP forecast for 2012 was €156-158 billion, and there wasn’t any great expectation that GDP for 2013 would be much higher than that.

Tax receipts are broadly in ratio with GDP. The CSO Taxation table (Table 22, National Accounts) puts the tax/GDP ratio at 28% for recent years and at 30-31% for the previous years since 2000. Taxation per the CSO table has a broader definition than per Budget day tax levels, and includes rates, household motor taxation (via local authorities) and PRSI (Employer & Employee).

This latest GDP projection for 2013 now suggests an increase in Taxation/Prsi (based on a similar 28% ratio) of around €3 billion compared to the 2012 projections, a significant amount in the context of the corrections targeted in the EU/IMF bailout programme.

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