Category: Economic growth

Some thoughts on the QNA release

With all that was going on in Brussels, the fourth-quarter QNA release got less attention than might have been expected.  As usual, the numbers don’t all point in one direction.  And also as usual, the quarterly numbers must be treated with caution given their volatility and propensity for revision. 

The annual declines in real GDP (1 percent) and real GNP (2.1 percent) received the most coverage.   But the annual numbers can give a misleading picture when the economy is at a turning point.   A better measure is the percentage change over the same quarter of the previous year.   I linked to these graphs on the thread following the release.   The noticeable turnaround in real GNP is encouraging (up 2.7 percent on quarter four of 2009); less encouraging is the 0.6 percent decline in real GDP, with the overall performance dragged down by a poor final quarter.    

The final graph in the set shows again the “two economies” reality of recent Irish growth performance.   The only thing that I would add is that the underlying potential growth of the economy is a critical factor for our capacity to pull out of the debt crisis without default.   Recognising the likely impact of the austerity measures on domestic demand, I think the picture is consistent with the (ESRI) view of solid underlying export-driven growth potential.

The main bad news in the release relates to the performance of nominal GDP.    The Budget 2011 forecast for nominal GDP in 2010 was €157.3 billion.   The actual nominal GDP turned out to be €153.9 billion – a 2.1 percent shortfall over the budget day forecast.   Readers might recall that the €157.3 billion was itself the result of an earlier downward revision (see Philip Lane’s explanation here).  

If that nominal shortfall carried over to 2014, the deficit would have to be reduced by an additional €94.1 million to meet the 2.8 percent of GDP deficit target for that year.   This back-of-the-envelope calculation ignores the impact of any additional deficit reduction on GDP.   Of course, there are even more severe implications if we are required to hit the higher intermediate targets along the way (for these targets see Table 6, p. D19 here; see p. D9 for the Budget 2011 nominal GDP projections).   For example, an extra €316 million would have to be taken off the deficit to meet the 9.4 percent deficit target for 2011.  It should be noted, however, that the poor performance for nominal GDP mainly reflects an eyebrow-raising quarter-on-quarter drop in the final quarter (down 6.6 percent, seasonally adjusted), and could be even more than usually subject to revision. 

Michael Casey in DRB

Some readers might be interested in Michael Casey’s ‘Must do Better’, just published in the online Dublin Review of Books at http://www.drb.ie/more_details/11-03-17/Must_Do_Better.aspx. 

The DRB is generally brilliant and worth supporting.

Ireland First Blueprint Document

Via Namawinelake, here‘s the up-to-now secret “Blueprint for Ireland’s Recovery” that has been produced by a group that apparently call themselves Ireland First. As you’ve probably heard, the group includes businessmen like Dermot Desmond and Denis O’Brien as well as various grandees with links to Fine Gael (John Bruton, Frank Flannery, Peter Sutherland), Fianna Fail (Ray McSharry) and Labour (Dick Spring).

Naturally, given that it’s an economic recovery plan, there isn’t an economist in sight. And, as is often the way with non-economist plans, it’s mainly a long laundry list of stuff the group would like to see happen combined with ambitious claims and targets related to what might happen if the chosen policies were adopted. Many of the policies proposed are sensible, some less so.

I particularly disliked this bit: “There needs to be a positive engagement with editorial and ownership/senior management of media organisations in order to ensure we have balanced coverage and that good news stories are covered.”  Ah yes, the meeja need to stop talking down the economy.  Some things never change.

Triumph of the City

A book that deserves some attention from policymakers here is Edward Glaeser’s new book “Triumph of the City“. The book has nine chapters, along with an intro and conclusion. It makes the case that city-living is, in general, conducive to innovation, health and environmental protection. The nine chapters go through the role cities play in bringing people with ideas together, the role of slums in acting as a pathway from destitution, the attractiveness of cities as places to live, the health advances that have been made in cities, the benefits of building up, the role of human capital policies, and the environmental advantages of cities.  Glaeser puts particular store on policies designed to build human capital in cities through education and through attracting intelligent and entrepeneurial people. Its simplifying his position somewhat but he strongly advocates building up rather than sprawl and he is a critic of the use of building projects as methods of urban renewal. Glaeser has published several highly influential articles in Economics and he really packs ideas into this readable book. If anyone has read it, or is going to read it, feel free to use this thread to talk about some of the ideas in the book as well as their relevance in Ireland.

Migration Estimates

This is an addendum to John McHale’s last post and a response to JTO’s plea for more real data on this site. Below is a consistent series (based on CSO data) for the net migration rate from 1961 to 2010.  The net flow has been expressed as a rate per 1,000 average population. The years are to end-April.
We await with great interest the results of the 2011 Census, which will give us a fix on the migration trend for the year ending April 2011 and allow the estimate for 2002 to 2010 to be updated. 
Preliminary Census results should become available by the end of the summer.