Dismal Numbers: The Recession Diaries - November 22nd
Sometimes numbers tell the best story. They may not tell us why - that comes afterwards, when we try to explain. But numbers are a good starting point. The OECD Economic Outlook has produced a set of numbers with which we can do some charting (I apologise but the Outlook is not accessible on-line -at least, I can’t find it; if readers want the full copy please e-mail me I will forward them on). And a dismal set of numbers this is. Much of these are estimates and so the numbers will change. But the general trend is pretty much set.
Let’s start with real GDP growth. For the period 2008-2010, Ireland is a league leader in the recessionary stakes — by far. The next worst-suffering country - Finland - will only see their economy fall by less than half the Irish rate of decline. The average decline in the other EU-15 countries is estimated to be less than -3 percent; Ireland, over -12 percent. Told you it was dismal.
And 2011? Now here we are really getting into tentative territory - especially with the OECD warning that the global recovery is still too ‘thin’ and the IMF advising countries not to prematurely exit from stimulus measures. So treat these projections carefully. Still, they tell an unsurprisingly similar story. Irish GDP will grow by 1 percent while the other EU-15 countries will on average grow by 2 percent with Eurozone countries growing by 1.7 percent. Ireland will remain the worst performer, apart from Spain.
So we have a situation where the Irish economy was hit hardest during the recession and will lag behind other EU countries coming out. It should be noted that OECD estimates are at odds with most domestic commentators who are predicting higher growth for Ireland in 2011 (with the exception of Jonathan Stenning of Cambridge Econometrics whose numbers tally with the OECD). So, it remains to be seen who will come out right. We should all hope it’s not the OECD.
But you don’t get off that easily. Here are some more numbers to really make your day. In regards unemployment, there we are again - at the top. Our rise in unemployment has been twice the pace as other EU countries. Italy will have suffered least while Spain is the next in line in the dismal stakes. In fact, of the other 14 EU countries, nine will see their unemployment rates rise by less 3% points.
And let’s not forget - most other countries don’t have the safety valve of emigration. If we turn to the EU Commission database (the OECD doesn’t have this breakdown) find that Irish employment will fall by -11.7 percent between 2008 and 2011, compared to the Eurozone average fall of -3 percent. We are shedding jobs at nearly four times the rate of the Eurozone.
We can go through other numbers. Take investment: In Ireland, it will fall by over –70 percent (yes, -70 percent) in the three years to 2010. Compare that to the Eurozone average fall of -12 percent. In 2011, Eurozone investment will rise by 2.3 percent. Ireland will be lagging with a growth rate of 0.5 percent.
Of course, some will point out that this reflects the bursting of our property bubble and, given our over-reliance on construction, this decline shouldn’t be surprising. Well, yes, that’s the point about investment during the last decade. But let’s look at non-housing investment (and here we have to turn to the EU Commission database since the OECD doesn’t have this breakdown). Investment in equipment will fall by over 50 percent in Ireland, whereas the decline in the Eurozone will be less than 18 percent.
Or consumer spending: in Ireland, consumer spending will fall by over -10 percent in the three years while the Eurozone average will be less than -1 percent. And in 2011, while Eurozone consumer spending will rise by 1.1 percent, Ireland will remain in the doldrums with spending still falling at -1.4 percent.
And domestic demand? This is the total amount of purchases in the economy - consumer and business, which reflects a broader level of economic activity. Well, it tells the same grim story. Given all this - all this decline, all this collapse - is it any wonder that by 2011 the OECD is predicting that the Irish government deficit will be -11.2 percent while the Eurozone average will be almost half that, at -6.2 percent?
There are some commentators obsessing over public expenditure levels and whether we should cut child benefit or hammer, again, public sector wages (how many times are we going to that well). But they miss, not only the elephant in the room, but the herd of elephants - the dramatic, almost unprecedented collapse in economic activity.
These are truly dismal numbers. I’m sure that people will have different reasons for how we arrived at this dismal state of affairs and how we might get ourselves out of this. Good. We need that debate. We need it now. All we are getting now is a one-hand-clapping debate where we are bombarded by demands to cut, cut, cut - cuts that have actively contributed to falling growth, employment, investment and consumer spending.
But, hey, let’s end on a positive note. Besides all this, besides all those dismal numbers from the OECD report, everything is just fine. Ireland is in the World Cup, it hasn’t been raining in the last week, and Jedward are, in fact, anti-bourgeois avant-garde artists, inspired by the Dada experience that swept European culture early last century.
Oh, and, yes, the Government’s policy is working.
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Nov 23rd 2009