Ireland: Real GDP growth will come in at between 5.0% and 5.5% in 2007
THE Exchequer will be in surplus by around €500m as against a deficit target for the year as a whole of €546m (0.3% of GDP), according to Bloxham’s quarterly economic review.
Bloxham economist Alan McQuaid said that while much of the media focus has been on the property/construction sector, the major area of concern at the moment in is inflation.
“Headline inflation appears to be stuck around the 5.0% level, and indeed is now forecast to average that level for the year as a whole. The bottom line is that if inflation is let get out of control, it will have serious negativeconsequences for competitiveness.
“However, the problem is that we have no control over what happens to interest rates and/or oil prices, and as such we are very much at the mercy of the gods as regards developments on these fronts. Therefore, there is an onus on the next government to do everything in its power to contain the price rises in the public service, and that includes pay,” he said.
Mr McQuaid added that judging by the amount of negative media coverage in recent weeks one could be forgiven for thinking that the Irish economy is headed for a serious slowdown.
“We think that the majority of official statistics released in the year to date point to an economy that is still growing strongly in 2007, although GDP growth is unlikely to be as high as last year’s 6.0%.”
Mr McQuaid said that while the doom and gloom merchants have pointed to the fact that the export side of the economy looks increasingly vulnerable as a result of rising domestic costs and an appreciating euro, CSO figures paint a different picture.
“Official CSO data for the first three months of 2007 show the merchandise trade surplus running €300m higher in value terms than in the same period in 2006. On the output side, manufacturing production was 13.5% higher in January-April 2007 than in January-April 2006, again according to the latest CSO numbers.
“Meanwhile, on the personal spending front, retail sales in the first four months of 2007 were up 7.2% in volume terms on the same period in 2006 while new car sales in the January-May period were 7.0% higher than in the first five months of last year,” he said.
“Labour market trends also remain positive, with the opening quarter of 2007 posting an annual increase in employment of 76,800 or 3.8%. These numbers taken together hardly reflect an economy heading for a major downturn. At this stage, we see little reason to change our view that real GDP growth will come in at between 5.0% and 5.5% in 2007.”
A word to the wise