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The National Economy

Review of the Economy in 2010

The economic and financial difficulties associated with the global downturn continued in 2010. The number of housing units built fell to about 15,000 (over 40% below the figure for 2009). Unemployment continued above 13.5% and the banking sector required further funding, leading eventually to IMF involvement in Ireland. However, Government targets for tax revenues were met and there was a large rise (55%) in car sales compared to 2009. Economic activity began to stabilise early in 2010 and positive GDP growth figures were recorded in the first quarter. CSO preliminary data indicates that the full-year growth in GDP was 0.3% while that for GNP was -2.0%. While the domestic economy remained stagnant exports of goods and services increased at an annual rate of 6.7% for the year (18% for the fourth quarter). There was strong export growth in the pharmaceuticals, chemicals and medical devices sectors, which are less sensitive to the global economic cycle.  Strong growth was also seen in the agri-food sector, where exports were 8% above 2009 figures.

Employment losses were especially severe in the construction, retail and manufacturing sectors. The numbers in employment declined again in 2010, by 4%.   Table 1.1 outlines a range of macroeconomic indicators based on available data and projections for the years 2009 to 2011.

Table1.1 

Outlook for 2011

Based on projections from a range of institutions, the broad consensus for domestic economic activity in 2011 is that while activity will remain at lower levels in the near-term, the worst of the economic decline may have passed. On the domestic front, consumer spending has remained relatively stagnant and the banking sector has suffered further damage to confidence.  There has been a recovery in car sales and the level of unemployment has stabilised.  Internationally, prospects for the major economies have brightened during the course of 2010.  Irish exports have risen to our major markets and exchange rates are likely to favour a continuation of this trend through 2011.  Developments in the banking and financial sectors, as well as the public finances, will be central in facilitating any road to medium to long-term renewal.

Significant uncertainty remains attached to all economic forecasts.  The possibility of stronger world growth certainly looks more plausible than one year ago. The main downside risks on the international front would be any stalling or renewed downturn for our main trading partners, along with exchange rate risks and/or commodity price (particularly oil) price increases.

Table 1.2 outlines the forecasts for some of the aforementioned variables from various institutions. The consensus overall is that both GNP and GDP will grow, but unemployment will remain relatively unchanged while the level of employment will fall.

Table1.2