The Economic and Social Research Institute (ESRI) has today released their Quarterly Economic Commentary, Summer 2015. The authors predict a growth in GNP of 4.2 per cent in 2015 and of 3.6 per cent in 2016. Declines in unemployment are also expected, with the headline rate envisaged to fall to 8.3 per cent in 2016.
 
Kieran McQuinn of the ERSI says, "We continue to believe that the Irish economy will grow quite strongly in both 2015 and 2016. Notwithstanding the poorer than expected performance of both the US and UK economies in the first quarter of 2015, most domestic indicators, including taxation receipts, indicate that the recovery in economic performance is still very evident in the Irish economy."
 
A Research Note, published with the QEC, re-examines the “pass-through” relationship between the European Central Bank (ECB) policy rate and the standard mortgage variable rate (SVR) charged by Irish credit institutions. The issue has attracted renewed interest in recent times owing to the continued observed difference between the SVR and the rate of interest charged on other variable rate mortgages in the Irish market.
 
Kieran McQuinn, a co-author on the report said, "In updating earlier work, we establish that the relationship between the ECB policy rate and the SVRs in the Irish market has weakened further since 2011. Previous work has suggested two main reasons for this growing divergence - the current lack of competition in the Irish banking sector and the ongoing impaired nature of certain aspects of domestic institutions’ balance sheets.

The SVR issue would appear to be symptomatic of wider issues concerning the present state of the Irish banking sector. With negative growth rates for credit across all sectors of the Irish economy, the question is whether the sector, as it presently stands, can meet the needs of the recovering economy. As such, the emphasis now should be on policy measures which increase the prospect of competition in the domestic banking market. Ultimately, this has particular relevance for what and when the Government decides to do with the taxpayers’ stake in the different institutions."

Source: www.businessworld.ie