The Irish economy is expected to return to growth this year. On the back of a strong export performance, my Department is forecasting that GDP will grow by around 0.75% in 2011 and 2.5% in 2012. In the second half of 2010 we witnessed some easing in the annual rate of decline of GDP activity. Exports are expected to continue supporting economic activity over the medium-term, with a gradual pick-up in domestic demand also foreseen as the recovery broadens out and spills over to the labour market. For the period 2013-15, the economy is forecast to grow by 3% per annum on average. Unemployment is forecast to increase further this year, to around 14.5%. While the numbers out of work should start to decline next year and gradually come down over the medium-term, the unemployment rate is projected to stay high over the forecast horizon.
The unprecedented turmoil that the Irish economy is still going through means that there is a lot of uncertainty surrounding macroeconomic projections at this time and a number of risks to this outlook have been identified as recently as the end of April in the Irish Stability Programme Update. These risks include the speed of balance sheet repair, fiscal consolidation and credit availability. The balance of risks in respect of these domestic factors is largely to the downside. On the other hand, risks to the outlook for net exports are to the upside.
The Government is taking positive steps to shore up economic activity exemplified by delivering a number of innovative policies and structural reforms as outlined in the Programme for Government and the Jobs Initiative. These should assist in supporting economic activity in the period ahead.
The Department of Finance's GDP forecast for 2011 is broadly in line with that of the European Commission (0.6%), the Central Bank (0.9%) and the IMF (0.6%). In fact, the most recent Reuters consensus forecast for GDP growth has been revised upwards. Furthermore, I note that the ESRI recently published a forecast of 2% for GDP growth in 2011.