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John FitzGerald on Recovery Scenarios for Ireland

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stephen duffy says: 25 Dec 2010 16:21

I have yet to hear John Fitzgerald provide a even a half decent analysis overviewing where exactly we are at or where indeed the economy is headed. Both Brian Lenihan and John I am afraid to say have been consistently in cuckoo land when it comes to forecasting...

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About this Event

10 Dec 2010 @ 12:45

About the Event:

At this post-Budget briefing, Prof. John FitzGerald of the ESRI presented his views on 'Recovery Scenarios for Ireland'. Addressing first the real economy, he emphasised that recovery depends to a great extent on an increase in world demand and in Irish competitiveness.

He described a welcome growth in Ireland's exports that, while not particularly job-intensive of itself, will produce a balance of payments surplus that will provide a platform for future growth in domestic demand as the economy picks up. That demand will evolve as the deficit is dealt with, as the banking sector is fixed and as consumer confidence improves over the coming years. Unemployment will prove stubborn but the labour force is much more flexible and better educated than that which existed twenty years ago.

On Budget 2011, Prof. FitzGerald expressed some concern that the taxation measures could have been more job friendly and wondered if the expenditure measures might have provided more value for money.

On fiscal tightening, the €15 billion in cuts and tax increases planned from 2011-2014 amounts to roughly 8.5% of GDP. The cumulative effect of this is likely to be a GDP that is 4% lower than it would otherwise have been but we can still expect an average GDP growth rate of about 2.5% over the four years.

On the question of the conditionalities attached to the EU/IMF support package, he reckoned that what was asked for was probably what the Government intended on delivering anyway (with the exception of the extra support insisted upon for the banking sector). He emphasised the option value of the overdraft which the package provides for Ireland. This will allow Ireland to manage its debt and interest much more effectively and will result in Ireland paying less in interest than is widely expected.

Prof. FitzGerald's general assessment was that conditions were developing which will allow the economy to grow vigorously once the 'brakes are off'. However a successful resolution of troubles in the banking sector and an avoidance of fresh crisis in the European financial system are prerequisites of any such positive scenario.

Presentation slides can be downloaded by clicking on the 'Powerpoint' button below the video pane on this page.

About the Speaker:

John FitzGerald is a research professor at the Economic and Social Research Institute. A past president of the Irish Economic Association, he is also a member of the Irish Energy Research Council and of the High Level Group on Green Enterprise.

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