Automatización contable de los envíos del almacén a otras empresas

Economic Outlook

Against the backdrop of continued uncertainty regarding the European debt crisis and slowing internationaleconomic growth, particularly in Europe and the UK, the Irish economy is estimated to have grown by approximately 1 per cent in real GDP in 2012 and to have achieved a significant improvement in the public finances. As in recent years, growth has been driven by the performance of the external sector of the economy, particularly services, while domestic demand continues to contract in the face of high unemployment, austerity measures and deleveraging.

Although many of the uncertainties remain, it is likely that the Irish economy will continue to grow modestly in 2013 and 2014. Our present forecast is for an increase in real GDP of 1.4 per cent in 2013 and 1.7 per cent in 2014. The terms of trade are expected to improve by 2014, following several years of deterioration. The modest growth will continue to be driven primarily by the external sector, although our expectation is that some recovery in domestic demand is likely to contribute to growth over the forecast period. If our forecasts are broadly correct then the period 2011-2014 will represent the first period of annual consecutive growth in GDP since the commencement of the crisis.

In recent years the GNP measure of the Irish economy has been distorted by the movement of profits by UK domiciled multinationals, as outlined in our discussion of the balance of payments (Section 7). GNP is set to have increased by 3 per cent in 2012, but is due to fall back by 2 per cent in 2013, before growth of 1.4 per cent in 2014. The underlying change in GNP between 2012 and 2014 is about 0.5 per cent each year.

Our forecasts indicate that the fiscal targets set for 2013 could be difficult to meet. The revenue figures are realisable, but the expenditure targets may be more challenging. The sale of the contingent capital holding in Bank of Ireland is sufficiently large to ensure that the overall EBR target is met. In the short term one-off receipts can be used to keep the outturn within the targets, but a more sustainable set of measures is needed for the medium term. Faster growth in the world economy would ease the situation, but policy cannot be predicated on an assumption of this. A deal on the promissory notes would also ease the situation, but there would still be much to do. The promissory note situation has been

34 | Quarterly Economic Commentary – Winter 2012

extensively analysed by Whelan (2012).15 _{He concluded that the best approach}

would be a long delay in promissory note repayment and a slower pace of ELA repayment, agreed with the ECB. This may be the best that can be hoped for. A potential solution we have argued for in previous Commentaries is a monetising of the debt associated with Anglo Irish Bank and the Irish Nationwide Building Society and the debt associated with the recapitalisation of the covered banks.

Unemployment

The rate of unemployment remains above 14 per cent and while some reduction is forecast over the next two years, the driving force behind this is net outward migration. The scale of the unemployment crisis is further masked by a reduced participation rate where discouraged workers opt out of the labour force when jobs are difficult to hold and to get. The rate of long-term unemployment has continued to increase. Long-term unemployment is a particular problem because of deskilling both in relation to specific skills and in relation to work practices. It also has intergenerational consequences. Even if there is no immediate prospect of employment, the potential current and future costs are sufficiently large both from a personal and societal perspective to consider what measures might help to maintain peoples’ contact with the labour market. This issue has been extensively covered in ESRI papers, in relation to the 1980s crisis and the current one16_{. The}

research has indicated some guiding principles: activation should begin as soon as a person becomes unemployed and should be given to all of working age who are not working; people’s attempts to obtain work should be monitored regularly; and finally non-compliance should be met by sanctions. The newly introduced Intreo service offers a comprehensive approach to help jobseekers, but the service needs to be expanded rapidly, as it is currently being rolled out on a phased basis.

Adjustment in the Economy

As the economy faces into the fifth year of the Great Recession, there are no obvious signs that the major European economies are pulling out of recession. Indeed, the fear is that the recession may be gathering pace and that eurozone output could contract in 2013 under the continued impact of austerity measures now introduced widely across Europe. This will render Ireland’s task of correcting the public finances, restoring balance to private debt levels, reducing

15 _{Whelan, Karl., “ELA, Promissory Notes and All That: The Fiscal Cost of Anglo Irish Bank”. The Economic and Social}

Review, Vol. 43 No. 4, Winter 2012, pp.653-673.

16 _{McGuinness, S., P.J. O’Connell and E. Kelly (2011). “One Dummy Won’t Get it: The Impact of Training Programme} Type and Duration on the Employment Chances of the Unemployed in Ireland”, ESRI Working Paper 410. Dublin: Economic and Social Research Institute.

Kelly, E., S. McGuinness and P.J. O’Connell (2011). “What Can Active Labour Market Policies Do?” ESRI Economic Renewal Series 001. Dublin: Economic and Social Research Institute.

unemployment and returning to a stable long-run growth profile much more difficult. The economy has some experience of adjustment in the past. In the late 1950s the shift from inward looking to outward looking policies was a policy induced adjustment, while in the mid-1980s the shift to exports was made possible, not just by a favourable international climate, but also by market-driven changes which reduced wage inflation. In both cases the adjustment involved major changes for some groups in society. While the earlier adjustment is now seen through rose-tinted glasses, there were significant losers as well as gainers. The adjustment that took place resulted in the demise of many firms whose existence was due to the protectionism of the previous quarter century. The firms, owners and workers displaced by the removal of protection did not step easily into new activities. In the mid-1980s workers suffered real income declines and very high levels of unemployment before the adjustment got underway, and the rewards, in the form of full employment, took nearly a decade to realise. An important part of adjustment is the acceptance that there are potential losers, usually readily identifiable, while the potential winners are unknown and uncertain. Where adjustment is policy-driven a significant constraint policymakers face is the resistance to change by potential losers in an attempt to maintain their position.

For example, if there are significant market distortions which keep the price level too high then tackling these distortions will help lead to a lower price level. Some progress has already been made on this front. Since the crisis began Irish price levels have come down from 122 per cent of the EU average in 2008 to 109 per cent in 2011.17 _{The Troika have identified legal and medical services as two areas}

where restrictions on entry and competition have resulted in relatively high prices facing consumers and business. Domestic pricing relationships can also be a source of prices that are too high. Prescription drugs are a case in point (Box 1). The level of Irish prices on average in 2012 was just under 3 per cent higher than in 2007, using both the CPI and the HICP as the measure. The price level remains high, though competition has forced down prices in some retail areas. Furthermore, the continued expansion of grocery discounters could help to reduce margins and prices in the grocery trade.

Changes in pay and conditions of work would be more palatable if accompanied by a lower price level. Public sector pay remains high relative to private sector pay. Research shows the overall public sector pay premium has reduced (CSO, 2012; Kelly et al., 2013, this issue). However, the premium is still positive, though not identical across the public service earnings distribution, nor across all sectors

17 _{Eurostat data on comparative price levels}

36 | Quarterly Economic Commentary – Winter 2012

of the public service (Kelly et al. 2009, CSO, 2012).18 _{The proposed extension to}

the Croke Park Agreement represents an attempt to deal with the pay issue, within the context of the need for further sustainable fiscal adjustment. As we understand it, the proposals encompass: pay cuts, longer working hours, changing increments, a cut in overtime rates, and changes in work practices. In previous

Commentaries we have argued in favour of cutting pay rather than numbers as a

means of reducing the overall cost of services while seeking to preserve the level of services. The original agreement excluded further pay cuts as an option. Hence in the last Commentary we argued that if pay levels were sacrosanct, then to maintain services it would be necessary to increase the output per person in the public sector. The reported proposals may go some way to realising both approaches, payroll cost reductions and more output per person.

Controlling payroll costs is particularly important where the level of expenditure is to some extent demand driven, for example, in health services. Hospitals do not have the option of turning away seriously ill people. Where payroll costs are managed through delaying procedures for non-life-threatening illness, the consequence are borne by those requiring treatment. Without adjustment in the public sector, it is difficult to see how the expenditure targets can be met without a major cost in terms of service reduction.

18 _{Central Statistics Office, 2012. National Employment Survey 2009 and 2010 Supplementary Analysis, October.}

Kelly, E., S. McGuinness and P. O’Connell, 2009. “The Public-Private Sector Wage Gap in Ireland: What Lies Beneath?”, ESRI Working Papers,No. 321.

Kelly, E., S. McGuinness and P. O’Connell, 2012. “Comparing Public and Private Sector Pay in Ireland: Size Matters”, Research Note, ESRI Quarterly Economic Commentary, this issue.