IMF shows confidence in Ireland’s economic prospects

Tom Ferris is a Consultant Economist specialising in Better Regulation. He was formerly the Department of Transport’s Senior Economist.

 

 

IMF SHOWS CONFIDENCE IN IRELAND’S ECONOMIC PROSPECTS

 

Introduction

The International Monetary Fund (IMF) has just published its latest global economic forecast. It foresees lower global economic growth in 2015 compared to 2014. On a regional basis, it forecasts a modest pick-up in advanced economies. And, by contrast, slow growth is forecast for emerging markets, mainly reflecting weakness in the large emerging economies, especially China and oil-exporting countries. But Ireland remains on track in its economic recovery.1

No great surprises

The forecasts contain no great surprises. Advance speeches have been signalling ‘slow-growth’. In a speech in Washington on 30 September,Christine Lagarde, Managing Director of the IMF, shared the information that

“...global growth will likely be weaker this year than last, with only a modest acceleration expected in 2016. The good news is that we are seeing a modest pickup in advanced economies... The not-so-good news is that emerging economies are likely to see their fifth consecutive year of declining rates of growth”.2

Composition of Growth

In this most recent forecast, the global economy is expected to expand by just 3.1% this year, and 3.6% next year. This represents a downward revision from previous forecasts; by 0.2% in both cases. It is pointed out that even though wealthy countries are showing signs of recovery – led by US growth forecasts at 2.6% for 2015 and 2.8% for 2016 – the world economy is on track for its worst year since the global recession of 2009. The IMF concludes that "

[d]ownside risks to the world economy appear more pronounced than they did just a few months ago ...”

Prospects across the major economies remain uneven. Relative to last year, the recovery in advanced economies is expected to pick up slightly, while activity in emerging markets and developing economies is projected to slow for the fifth year in a row, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries.

With declining commodity prices, depreciating emerging market currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies. Global activity is projected to gather some pace in 2016. In advanced economies, the modest recovery that started in 2014 is projected to strengthen further. In emerging market and developing economies, the outlook is projected to improve: in particular, growth in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East), while remaining weak or negative, is projected to be higher next year, more than offsetting the expected gradual slowdown in China.

The IMF recognises that its forecasts are not just about ‘economics’. Political factors are very relevant. In that regard, the IMF note that

“Geopolitical tensions are assumed to stay elevated, with the situation around Ukraine remaining difficult and strife continuing in some countries in the Middle East. These tensions are generally assumed to ease, allowing for a gradual recovery in the most severely affected economies in 2016–17”.

Ireland’s Economic Performance

Against a sluggish global outlook, the IMF is quite optimistic about Ireland’s prospects. The Table below shows that the IMF has increased its forecast for growth in Gross Domestic Product between April 2015 and October 2015. With the expected better economic performance, the unemployment rate is forecast to fall further, with an 8.5% unemployment rate by 2016. This is a remarkable reduction from 15.1% in February 2012. As regards consumer price forecasts, the IMF sees no change as between the forecast for April 2015 and that for October 2015.

              Table: IMF Forecasts for Ireland, April 2015 and October 2015

2014

2014

2015

2015

2016

2016

IMF Forecast Dates

Apr-15

Oct-15

Apr-15

Oct-15

Apr-15

Oct-15

Real Gross Domestic Product (% annual change)

4.8

5.2

3.9

4.8

3.3

3.8

Consumer Prices (% annual change)

0.3

0.3

0.2

0.2

1.5

0.2

Current Account Balance (% of GDP)

6.2

3.6

4.9

3.2

4.8

3.0

Unemployment (%)

11.3

11.3

9.8

9.6

8.8

8.5

2018-03-16T12:05:15+00:00October 7th, 2015|News|Comments Off on IMF shows confidence in Ireland’s economic prospects

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