GDP forecast to grow by 2.1% in 2014 & by 2.7% in 2015
Employment forecast to grow by 2.2% in 2014 bringing unemployment to 11.5%
Macroeconomic figures endorsed by the Irish Fiscal Advisory Council
General Government Deficit of under 3% targeted by 2015 and elimination by 2018
The Department of Finance has today (15 April 2014) published the Ireland’s Stability Programme – April 2014 Update in draft form. The SPU sets out the official macro-economic and fiscal forecasts for Ireland out to 2018 and is the first update of the Government’s macroeconomic and fiscal projections since Budget 2014 in October of last year.
GDP is expected to grow by 2.1 per cent this year, strengthening to 2.7 per cent next year and to 3.5 per cent by 2018, the end of the forecast horizon. Employment is expected to grow by about 2 per cent per annum to 2018, with unemployment falling to 8 per cent. HICP inflation is set to remain low (at 0.5 per cent this year) and remain muted over the next number of years.
The macroeconomic forecasts underpinning the SPU have been endorsed by the Irish Fiscal Advisory Council.
On the fiscal side, yesterday’s fiscal release by the CSO shows a deficit of 7.2 per cent of GDP, comfortably inside the EDP deficit ceiling of 7.5 per cent. For 2014 a deficit of 4.8 per cent is forecast – the same as Budget day. The underlying deficit is set to fall to 2.9 per cent in 2015, and return to a position of balance in 2018. The debt ratio peaked last year at 124 per cent of GDP. It is set to fall to 107 per cent by 2018 as the deficit is eliminated and economic growth continues.
The Minister for Finance will present the draft SPU to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform this evening and the final document is set for submission to the European Commission before the end of this month.
Speaking on the publication of the Stability Programme Update the Minister for Finance Michael Noonan stated:
“The Irish economy is performing well and in the Stability Programme Update we are forecasting a strengthening of this recovery. Although GDP was weak last year, it was impacted by sector-specific developments and my Department is now forecasting GDP growth of 2.1% in 2014, strengthening to 3½ per cent by 2018.
Most importantly, this recovery is translating into jobs with employment growing by 3.3 per cent (or 61,000 jobs) in the year to the final quarter of 2013. Today’s forecasts see a continuation of employment growth over the forecast horizon and a fall in unemployment to under 10% by 2016 and to 8 per cent by 2018. The stated objective of the Medium Term Economic Strategy published in December is full employment by 2020 and today’s forecast would suggest that we have made a very strong start on achieving this.
On the fiscal front, the fiscal data as published by the CSO yesterday highlight the progress that we are making in restoring order to the public finances. A deficit of 7.2 per cent of GDP was recorded for 2013, inside the EDP ceiling of 7.5 per cent. The fiscal strategy to reduce the deficit to below 3 per cent in 2015 is on track. The Government will set out budgetary policy for 2015 on Budget day in October of this year”
Notes for editors
As part of the European Semester, each Member State submits a Stability Programme Update (SPU) to the European Commission in April of every year. Ireland is a full participant in the European Semester process following exit from the EU-IMF programme in late 2013.
A copy of this year’s draft stability programme is [here insert hyperlink].
Under the two-pack and Fiscal Responsibility Acts 2012 and 2013, macroeconomic forecasts for the Budget and SPU are provided to the Irish Fiscal Advisory Council (IFAC) for ex-ante endorsement. The macroeconomic forecasts underpinning the SPU have been endorsed by the Irish Fiscal Advisory Council. The endorsement was provided by way of a letter from the Chair of IFAC to the Secretary General of the Department which is annexed to the SPU.
The next set of fiscal and budgetary forecasts is scheduled for Budget time in mid-October, and will take into account Budget measures which will be the subject of Government decisions in the meantime.
Table 1: SPU 2014 aggregates
SPU 2014 (April 2014)
2013 2014 2015 2016 2017 2018
Real GDP growth -0.3 2.1 2.7 3.0 3.5 3.5
Employment growth 2.4 2.2 2.0 2.0 1.9 1.9
Unemployment rate 13.0 11.5 10.5 9.7 8.9 8.0
Underlying General Government Balance (% of GDP) -7.2 -4.8 -2.9 -2.2 -1.2 0.0
EDP target -7.5 -5.1 -2.9 n/a n/a n/a