Budget 2015 Macroeconomic Forecasts

Presentation to Joint Committee on Finance, Public Expenditure and Reform

7 October 2014

International Developments & Inflation

2

Mixed picture among trading partners

3

2012

q120

12q2

2012

q320

12q4

2013

q120

13q2

2013

q320

13q4

2014

Q1

2014

Q2

2012

q120

12q2

2012

q320

12q4

2013

q120

13q2

2013

q320

13q4

2014

Q1

2014

Q2

2012

q120

12q2

2012

q320

12q4

2013

q120

13q2

2013

q320

13q4

2014

Q1

2014

Q2

US UK euro area

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

q-o-

q %

cha

nge

4

Source : Eurostat

Ireland, HICPEA, HICP

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

IE August 20140.6

EA September 20140.3

S N J M M J S N J M M J S N J M M J S2011 2012 2013 2014

“lowflation” is prevailing in euro area

Core inflation in Ireland rising steadily since February

5

CoreEnergy & Unprocessed FoodTotal

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.251.0

-0.4

0.6

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug2013 2014

Real economy

6

Strength in retail sales has continued into Q3

7

Retail Sales

Core retail salesMotor Trades

-2

0

2

4

6

8

10

3.6

3.3

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug2013 2014

Investment has been driven by ‘core’ M&E and construction

8

Core Machinery and Equipment

-20

0

20

40

60

80

12.2%

21.6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q22012 2013 2014

National accounts measure of goods exports very strong

9

NIE goods exports volume

-10.0

-5.0

0.0

5.0

10.0

15.015.92014 Q2

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q22011 2012 2013 2014

Outlook and labour market

10

Endorsed Budget 2015 forecasts

11

Year-on-year change 2013 2014 2015GDP 0.2 4.7 3.6GNP 3.2 4.1 3.3Nominal GDP (nearest €25m) 174.8 183.8 193.0

Personal Consumption -0.8 1.7 2.2 Govt Consumption 1.4 4.8 1.0Investment -2.4 14.6 12.5Exports 1.1 8.3 4.8Imports 0.6 8.8 5.1

Domestic demand (pp cont) -0.7 3.6 3.3Stocks (pp cont) 0.3 -0.1 -0.2Net exports (pp cont) 0.6 1.3 0.8

HICP 0.5 0.5 1.0GDP Deflator 1.0 0.4 1.3Current a/c (% of GDP) 4.4 4.9 4.6

Continued improvements in the labour market

12

Employment, rhsLive Register, SA, lhs

370

380

390

400

410

420

430

440

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1.7

374800

Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep2012 2013 2014

Labour market outlook

13

2013 2014 2015

Employment growth2.4 1.8 2.2

Agri24.3 2.5 1.8

Industry (inc. B&C)2.0 2.7 2.8

Services1.2 1.7 2.1

Unemployment rate13.1 11.4 10.2

Labour force growth 0.4 -0.1 0.9

Drivers of labour market outlook

14

2010 2011 2012 2013 2014 2015-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%Contributions to change in UE Rate

from LF growthfrom employment growthPP change in unemployment Rate

perc

enta

ge p

oint

s

2011 2012 2013 2014 2015-25

-20

-15

-10

-5

0

5

10

15

20

25Labour force change

::: participation

::: demographic ( >15 yrs) net of migration

LABOUR FORCE change

Leve

l ('o

oo's)

15

Summary

• Recovery is gaining momentum and widening• Forecasts are being revised upwards for this year

and next• No-policy-change assumption is made for these

forecasts– Subject to revision on Budget day

16

Risks

• External – Geo-political tensions– Weak growth and low inflation in the euro area– Financial market risks

• Domestic– Potential for more rapid recovery in investment

End

17