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Growth in Republic's GDP set to exceed 6% this year

The view from Dublin

By Brendan Keenan

"And faded through the brightening air."

Recent talk about Ireland's recovery - and whether there is one - brought to mind Yeats' description of the vision of the wandering Aengus.

The air is certainly brightening. The most recent official forecast - that of the EU Commission - was happy to accept that growth in the output of goods and services (GDP) might exceed 6% this year.

Even more remarkably, it's forecast for national income (GNI), widely regarded as a better measure for the Irish economy, is for growth of 8%. No wonder Brussels' statisticians took a benign view of October's jolly Budget. The troika, along with others, will express concern, but is there anything to be concerned about?

Unemployment continues to fall and tax revenues pour into the Government coffers. These easily-measured events have become more important as other figures become ever more difficult to interpret. But even they have their complications. There is, for instance, the unexpected €2bn (£1.4bn) in corporation tax receipts. No one seems to know where it came from, and certainly not whether it will last.

Those complications may be the source of the sense that, like the vision, it is all something of a chimera, however bright the air. One difficulty is that growth rate. It just seems too good to be true. That may not be entirely the case but is it too good to last?

During the recession, one worried that recovery, if and when it came, would be disappointing compared with the spectacular growth in the boom, and peter out from lack of confidence. Instead, we have growth which matches those heady days but confidence has been slow to improve. The recovery is real enough, but some things about it are odd.

I gave the full definition of GDP because growth is a slippery concept. Comparing a situation with 12 months ago - which is what "growth" usually means in these cases - is a useful exercise but it has its limitations. In particular, it does not tell you anything about the actual situation last year and now - only the change.

That matters when it is a cyclical recovery - output picking itself up off the floor and dusting itself down after a fall.

Growth can be quite spectacular in those circumstances but still leave firms short of what they could make and sell if they had the customers.

Belfast Telegraph


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