Friday, 5 November 2010

They didn't even number the pages

Michael Taft: Let me see if I get this. The Government produces a new set of projections yesterday in their Economic and Budgetary Outlook (a new acronym: EBO). Compared to their projections last December, these are the new numbers for 2011:

• GDP growth cut from 3.3 percent to 1.7 percent – that’s a mighty slice

• GNP growth cut from 3 percent to 1 percent - that’s an even mightier slice

• Consumer spending cut from 2.6 percent to 0 – that’s called flat-lining

• Investment cut from 4.5 percent to (–) 6 percent – ouch

• Government spending on public services cut from (-) 0.5 percent to (-) 3 percent – you’ve been warned

• Employment cut (literally) from a 1 percent growth to (-) 0.25 percent – in hard numbers that’s a difference between having 19,000 more people at work and 5,000 less (but don’t worry, Batt O’Keefe is in total control of his Department)

And that’s just for 2011. What about projections up to the 2014? Not as much detail but:

• Nominal GDP has been cut by over €21 billion, or over 10 percent – if the Government’s tax revenue ratio’s hold, underlying tax revenue by 2014 will slump by over €4 billion over last year’s projections.

• Real GDP growth rate cut from 4 percent annual average to 2.7 percent

• No numbers on GNP out to 2014 but that’s not surprising: last year the Government projected GNP growth to 90 percent of GDP growth in 2011; now GNP will only grow by 59 percent of GDP growth. The domestic economy is slipping well behind the headline rate.

• Employment growth has been cut from an average annual rate of 2 percent to 1.1 percent – that will now mean 75,000 fewer people at work.

But, hey, it’s not all doom and gloom. Take those employment figures – they’re collapsing yet the unemployment rate is expected to remain much the same; a slight increase of 0.25 percent in the unemployment rate. How does this occur? The paper puts it eloquently:

‘Net outward migration will restrain the pace of growth in labour supply, which combined with the increase in net employment will reduce unemployment to under 10% by the end of the forecast horizon.’

What a nice way to describe mass emigration.

Or take the export figures. The Government is revising growth upwards for 2011 (no numbers after that) from 3.4 percent to 5 percent. This is in line with other forecasters and shows the strength of, at least, our multi-national exporting sector. But where does that leave the export-led recovery strategy?

But the bottom line is the deficit. And though the world changes – growth rates, employment, emigration and hollow export-growth – though everything is change, we can still rely on death, taxes and Maastricht compliance by 2014 as the ballast that gives compass to our economic lives.

Okay, so we are expected to believe that reduced growth rates, reduced employment, higher emigration, a third consecutive year of domestic-demand recession (that is, excluding net exports), more deflationary policies will somehow translate into fiscal stability; just close your eyes and think of the Stability and Growth Pact.

All this from a 10-page economic and budgetary outlook that was put together and rushed out so quickly, they didn’t even have time to number the pages.

A long sound of exhalation.

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