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