Country Forecast Ireland
The Economist Intelligence Unit, June 2012, Pages: 48
The Economist Intelligence Unit expects the Fine Gael-Labour Party coalition to serve its full term to early 2016. However, prolonged austerity and economic restructuring are likely to erode its popular support and exacerbate differences within the coalition. A major risk is that if the euro area crisis escalates, the ensuing financial turmoil would hit Ireland. We expect that the government will undergo a managed sovereign debt restructuring with the co-operation of the banks, the EU and the IMF in 2013, when the current EU/IMF bail-out programme expires, and a haircut of around 25% should reduce public debt to just under 100% of GDP at end-2013. The export-driven economic recovery that got under way in the first half of 2011 has stalled. We expect GDP to contract in 2012 and to recover gradually from 2013. Output in 2016 will still be below its 2007 pre-crisis peak. We expect the current account to remain in surplus during the forecast period.
Popular support for the coalition government has continued to fall, amid growing frustration with austerity measures and economic weakness.
One potential trigger-point for a deterioration in Irish-EU relations was overcome in May, when voters approved the planned EU "fiscal compact" aimed at strengthening euro zone fiscal discipline. In theory, a no vote would have seen Ireland facing the prospect of being cut off from future bailout funds.
Country Forecast Ireland
Ireland at a glance: 2012-16
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Ireland--highlights: Political outlook
Ireland--highlights: Demographic outlook
Ireland--highlights: Business environment outlook
Ireland--highlights: Economic outlook
Ireland--highlights: Market opportunities
Ireland--highlights: Long-term outlook
Fact sheet
Political outlook: Political forces at a glance
Political outlook: Political stability
Political outlook: Political and institutional effectiveness
Political outlook: Election watch
Political outlook: Key players to watch
Enda Kenny (Fine Gael)
Eamon Gilmore (Labour Party)
Michael Noonan (Fine Gael)
Michael Martin (Fianna Fail)
Political outlook: International relations
Demographic assumptions
Migrant flows will largely reflect economic performance
The birth rate will fall slightly over the forecast period
Business environment outlook: Business environment rankings
The near-collapse of the banking system will have repercussions for many years
Business environment outlook: Ireland's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
Taxes
Financing
The labour market
Infrastructure
Business environment outlook: Macroeconomic environment
Ireland's macroeconomic outlook is highly uncertain
Business environment outlook: Policy towards private enterprise and competi
Light-touch regulation will exclude financial services
Business environment outlook: Policy towards foreign investment
Ireland will remain one of the world's most open and relaxed FDI destinations
Business environment outlook: Foreign trade and exchange controls
There is little prospect that the Doha round of trade talks will progress
Business environment outlook: Taxes
The overall tax burden will rise steadily
Business environment outlook: Financing
The country's banks will remain a key source of risk
Only two main domestic banks will emerge from the crisis
Business environment outlook: The labour market
Labour market will feel the lagged effects of recession
Business environment outlook: Infrastructure
Public investment in infrastructure has fallen steeply and will remain weak
Economic forecast: Policy trends
Economic forecast: Fiscal policy
Economic forecast: Monetary policy
Economic forecast: International assumptions
Economic forecast: Economic growth
Economic forecast: Sectoral trends
Economic forecast: Inflation
Economic forecast: Exchange rates
Economic forecast: External sector
Economic forecast: Foreign direct investment in Ireland
Stocks and flows
Origin and distribution
Determinants
Impact
Potential
Market opportunities: Market outlook
Savings ratio to rise, affecting discretionary spending
Market opportunities: Consumer expenditure
The housing market crash will have an impact on many economic sectors
Market opportunities: Social indicators and living standards
Long-term outlook: The long-term outlook
Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth
Data summary: Global outlook
Data summary: Gross domestic product, current market prices
Data summary: Gross domestic product, at constant prices
Data summary: Growth and productivity
Data summary: Economic structure, income and market size
Data summary: Fiscal indicators
Data summary: Monetary indicators
Data summary: Employment, wages and prices
Data summary: Current account and terms of trade
Data summary: Foreign direct investment
Data sources and definitions
Global data
Domestic data
Abbreviations
Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues
Indicator scores in the business rankings model
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