Quarterly Economic Commentary, Autumn 2011

Durkan, Joseph and Duffy, David and O'Sullivan, Cormac (2011) Quarterly Economic Commentary, Autumn 2011. [Working Paper]

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Abstract

The situation in the international economy has deteriorated in recent months. The eurozone debt crisis has not been resolved, rather it has spread, and now two major economies, France and Italy, are pursuing restrictive policies to contain budget deficits, in tandem with contractionary policies in Spain, Greece, Portugal and Ireland. As a consequence, output in the eurozone economy will perform very poorly and may contract year‐on‐year and is certainly likely to contract from the end of 2011 to the end of 2012. This will have the effect of making it difficult for all eurozone countries to meet fiscal targets. This outcome will also hamper the restructuring of the UK economy and reduce its growth prospects. The US economy now seems to have recovered from the poor performance that began in the fourth quarter of 2011. Given this very unfavourable background the Irish economy is likely to experience very limited growth – less than 1 per cent for GDP and a fall in GNP next year. Three months ago the possibility of building on an improved performance in 2011 made us reasonably optimistic about growth in the economy and growth in employment. The deterioration in the eurozone economy makes that unlikely now, though the fiscal targets set for next year are achievable.

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