Positive forecast - Reasons for cautious optimism

In its quarterly economic commentary published today, the Economic and Social Research Institute predicts economic growth should remain strong in this country for the remainder of this year and throughout 2015.

It forecasts a 3.5% growth in the Gross National Product for 2014, and 3.7% in 2015, which would mark the greatest improvement since the days of the Celtic Tiger.

The survey provides a positive outlook, because GNP is considered the best measure of output and the national standard of living. Continuing improvements in our balance of payments and indications of growth in private investment are further evidence of economic recovery.

The continuation of these trends should lead to growth in output, with over 50,000 extra jobs. It should be stressed, however, that the ESRI is projecting that the unemployment rate would drop to an average of 10% of the labour force in 2015.

Nobody should therefore get carried away with the news, but it is the most hopeful sign of sustained growth we have had for some years. It looks like real light at the end of what has been a particularly long and dark tunnel.

The commentary also forecasts that government borrowing is likely to be 2.8%, which would be below the target of 3% of GNP agreed with the troika, even without the further budgetary cuts envisaged for 2015. But it warns that it is necessary to be prepared for new shocks to the economy to ensure that the budgetary targets are met for next year.

There are, of course, things that could be done to further stimulate recovery. The success of the state visit to Britain of President Michael D Higgins could be developed upon to provide a stimulus for tourism from the UK, which has always had the potential of being our strongest market.

Despite talk of house prices rising out of control in Dublin, the ESRI has found the economy is “some way off a housing bubble.” Some 12,000 new houses will be built this year, which is lowest level in the past 40 years.

People in the 21-35 age bracket have not been active in the property market for some years. They have been renting, or living at home. If the housing shortage is not tackled soon, however, the cost of living will go up as a result of higher rents and higher house prices, which would impede economic growth.

Thus providing extra housing has real potential for economic development. The number employed in the building sector could be tripled and the Government would increase its tax take in the process. This is common sense.