Recovery Scenarios for Ireland

Abstract

This paper examines recovery scenarios for the Irish economy. It estimates that the growth rate in potential output is 3% a year. This takes account of a permanent loss of output of 10% of GDP as a result of the recession. On this basis, and taking account of government fiscal action this year and in 2010, the government's structural deficit is estimated to fall to between 3 and 4% of GDP by the end of 2010. The analysis suggests that when the world economy recovers the Irish economy will follow suit recovering some lost ground. Should the world recovery be delayed until 2012 this would inflict some further damage but the Irish economy would still see quite rapid growth in the postponed recovery phase.