The Department of Finance published the Annual Economic Review and Outlook today, dealing with the out-turn for the economy for 2000 and the prospects for 2001.
Growth last year was strong. GNP rose by 10.4 per cent in real terms. GDP rose by 11.5 per cent, more than three times the EU average. This was the seventh successive year of very strong economic expansion. Against this background, employment continued to expand, rising by close to 77,000, while the General Government Surplus emerged at 4.5 per cent of GDP. However, inflation accelerated although a number of the contributing factors were temporary in nature.
The outlook for 2001 is for a significant moderation in the rate of growth. GNP is forecast to grow by 6 per cent in volume (and GDP by 7¼ per cent) this year. While significantly slower than last year, these rates of growth are still high in both international and historical terms. The slowdown reflects growing capacity constraints as well as the impact of a number of essentially external factors. In particular, the downturn in the world economy and adverse developments in the information and communication technologies (ICT) sector are dampening growth prospects this year. Domestically, the measures needed to counteract the threat of foot-and-mouth disease earlier this year affected activity in a number of sectors, notably in agri-food, distribution and tourism.
The slowdown is reflected in lower than anticipated tax receipts during 2001 and a reduction in the exchequer surplus forecast for 2001. Inflation is expected to reduce further during the second half of the year after declining by less than expected during the first half.
In commenting on the outlook, the Minister noted the slowdown in economic growth internationally and the more uncertain economic climate. Nonetheless, the growth forecast for 2001 compares favourably to growth abroad, although, as the Review and Outlook points out, it will be necessary to adjust expectations to meet the new situation. In relation to inflation, the Minister expressed the hope that the inflation trend for the rest of 2001 would be downward, in line with the recent reduction in the CPI recorded in July.
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