MTFS (II) - It's official, there is no recovery

Michael Burke: The government is focused on deficit-reduction. But it is failing to reduce the deficit.

There is an extraordinary discrepancy between the dominant ideas about the current state of the economy, the official and widespread ‘narrative’.
The MTFS states that says nominal GDP will be €155.25bn in 2011, with real GDP growth of 1% (Table 3.1, p, 22).

Yet the CSO's latest quarterly national accounts shows that nominal GDP was €39,032mn in Q1 and €39,553mn in Q2 (Table 5, extract below). If growth were zero in Qs 3 & 4 (€39,553mn), then nominal GDP for the year would be €157,691mn, much higher than the €155,250mn Noonan has forecast.


The actual outturn for nominal GDP in 2010 was €155,992. The government forecast is now €155,250. This is a contraction. Yet the whole document talks about a 'shallow recovery gathering momentum'.

Similarly, the forecast is for 1% real GDP growth. But real GDP in Q1 and Q2 was €40,315mn and €40,944mn (Table 1). Again, if growth is zero in Q3 & Q4 (stays at €40,944mn) then the total for 2011 will be €163,147mn. This would be 2% growth over 2010 total €159.906bn. To register a real GDP increase in 2011 of 1%, the economy has to contract sharply in the second half of this year. Alternatively, the Minister already has sight of sharp downward revisions to the recorded growth in the first two quarters of this year.

In either event, talk of a ‘shallow recovery gathering momentum’ is pure fiction, and the MTFS forecasts are rendered entirely without merit.

Posted in: Fiscal policy

Tagged with: MTFS