Quarterly Economic Commentary, Spring 2023

McQuinn, Kieran; O'Toole, Conor; Disch, Wendy; Shiel, Eva; Kenny, Eoin Research Report Quarterly Economic Commentary, Spring 2023 ESRI Forecasting Series Provided in Cooperation with: The Economic and Social Research Institute (ESRI), Dublin Suggested Citation: McQuinn, Kieran; O'Toole, Conor; Disch, Wendy; Shiel, Eva; Kenny, Eoin (2023) : Quarterly Economic Commentary, Spring 2023, ESRI Forecasting Series, The Economic and Social Research Institute (ESRI), Dublin, https://doi.org/10.26504/qec2023spr This Version is available at: https://hdl.handle.net/10419/295121 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ QUARTERLY ECONOMIC COMMENTARY SPRING 2023 KIERAN MCQUINN, CONOR O'TOOLE, WENDY DISCH, EOIN KENNY AND EVA SHIEL MACRO ECONOMIC FORECASTING March 2023 E V I D E N C E F O R P O L I C Y QUARTERLY ECONOMIC COMMENTARY Kieran McQuinn Conor O’Toole Wendy Disch Eoin Kenny Eva Shiel Spring 2023 The forecasts in this Commentary are based on data available by 16 March 2023. Draft completed on 27 March 2023. © The Economic and Social Research Institute, WhitakerSquare, Sir John Rogerson’s Quay, Dublin 2. ISSN 0376-7191 DOI: https://doi.org/10.26504/qec2023spr This Open Access work is licensed under a Creative Commons Attribution 4.0 International License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited. ABOUT THE ESRI The Economic and Social Research Institute is an independent research institute working towards a vision of ‘Informed policy for a better Ireland’. The ESRI seeks to support sustainable economic growth and social progress in Ireland by providing a robust knowledge base capable of providing effective solutions to public policy challenges. The Institute was founded in 1960 by a group of senior civil servants, led by Dr T.K. Whitaker, who identified the need for independent and in-depth research to support the policymaking process in Ireland. Since then, the Institute has remained committed to independent research and its work is free of any expressed ideology or political position. The Institute publishes all research reaching the appropriate academic standard, irrespective of its findings or who funds the research. The ESRI brings together leading experts from a variety of disciplines who work together to break new ground across a number of research initiatives. The expertise of its researchers is recognised in public life and researchers are represented on the boards and advisory committees of several national and international organisations. ESRI researchers uphold the highest academic standards. The quality of the Institute’s research output is guaranteed by a rigorous peer review process. Research is published only when it meets the required standards and practices. Research quality has also been assessed as part of two peer reviews of the Institute, in 2010 and 2016. ESRI research findings are disseminated widely in books, journal articles and reports. Reports published by the ESRI are available to download, free of charge, from its website. ESRI staff members communicate research findings at regular conferences and seminars, which provide a platform for representatives from government, civil society and academia to discuss key findings from recently published studies and ongoing research. The ESRI is a company limited by guarantee, answerable to its members and governed by a Council, comprising a minimum of 11 members and a maximum of 14 members, who represent a cross-section of ESRI members: academia, civil service, state agencies, businesses and civil society. THE AUTHORS The Commentary is edited by Kieran McQuinn and Conor O’Toole. Kieran McQuinn is a Research Professor and Conor O’Toole is an Associate Research Professor at the Economic and Social Research Institute (ESRI). Wendy Disch, Eva Shiel and Eoin Kenny are Research Assistants at the ESRI. Research Notes are short papers on focused research issues. They are subject to refereeing prior to publication. The Quarterly Economic Commentary has been accepted for publication by the Institute, which does not itself take institutional policy positions. It has been peer reviewed by ESRI research colleagues prior to publication. The authors are solely responsible for the content and the views expressed. Quarterly Economic Commentary – Spring 2023 | iii TABLE OF CONTENTS SUMMARY TABLE .............................................................................................................................. IV THE IRISH ECONOMY – OVERVIEW .................................................................................................... 1 RISK ANALYSIS .................................................................................................................................... 2 THE DOMESTIC ECONOMY................................................................................................................. 4 Output ................................................................................................................ 4 Demand ................................................................................................................ 6 Traded Sector .............................................................................................................. 12 Labour Market .............................................................................................................. 26 INFLATION OUTLOOK ....................................................................................................................... 34 PUBLIC FINANCES ............................................................................................................................. 46 RESEARCH NOTE Inpatient bed capacity requirements in Ireland in 2023: Evidence on the public acute hospital system B. Walsh and A. Brick ....................................................................................................................... 63 iv | Quarterly Economic Commentary – Spring 2023 SUMMARY TABLE 2022 2023 2024 Output (Real Annual Growth %) Private Consumer Expenditure 6.6 4.7 5.0 Public Net Current Expenditure 0.7 1.7 0.5 Investment 25.9 5.6 6.3 Modified Investment 19.8 3.5 4.5 Exports 15.0 8.0 5.8 Imports 19.0 7.0 5.0 Gross Domestic Product (GDP) 12.0 5.5 6.0 Gross National Product (GNP) 12.6 5.0 5.4 Modified Domestic Demand 8.2 3.8 3.9 Domestic Demand (excl. Stocks) 13.2 4.6 4.9 Labour Market Employment Levels (‘000) 2,537 2,593 2,604 Unemployment Levels (‘000) 130 114 113 Unemployment Rate (as % of Labour Force) 4.9 4.2 4.0 Public Finances General Government Balance (€bn) 5.0 4.7 9.8 General Government Balance (% of GDP) 1.0 0.9 1.7 Price Developments Inflation (CPI) 7.8 4.5 3.5 Notes: The unemployment rate and level through February 2022 are based on the monthly unemployment and the COVID-adjusted monthly unemployment series published by the Central Statistics Office (CSO). Import forecasts for 2023 and 2024 refer to underlying activity. However, if National Accounts data reveal a significant impact of distortionary activity on import levels later in the year, modified and headline forecasts will be provided in future Commentaries. Modified Domestic Demand refers to Modified Final Domestic Demand, which excludes large transactions of foreign corporations that do not have a large impact on the domestic economy. Definition available here: https://www.cso.ie/en/interactivezone/statisticsexplained/nationalaccountsexplained/totaldomesticdemandandmodifiedtota ldomesticdemand/#:~:text=Modified%20Total%20Domestic%20Demand%20goes%20further%20in%20trying,to%20exclude% 20certain%20items%20that%20are%20in%20TDD. Modified investment excludes investment in aircraft for leasing and investment in R&D from abroad. Inflation is measured by the annual percentage change in CPI. Quarterly Economic Commentary – Spring 2023 | 1 The Irish Economy – Overview • The pace of growth in the domestic and international economies is set to be stronger in 2023 than had previously been expected. • While inflation is expected to slow in the present year due to falling energy costs, second round effects may still exert upward momentum on general price levels. Furthermore, while inflation is expected to moderate, price levels are going to remain high which is likely to pose cost of living challenges. • Overall, we now forecast that modified domestic demand (MDD) will grow by 3.8 per cent in 2023 and 3.9 per cent in 2024. We expect inflation (CPI) to be 4.5 per cent in 2023 before easing to 3.5 per cent in 2024. • Two Boxes in the Commentary assess inflation related issues; Doorley, Duggan and Keane assess the distributional implications of the latest cost- of-living measures introduced by the Government in February while Disch and McQuinn present evidence to suggest domestic inflation may actually be running at a somewhat slower pace than official estimates suggest. • In another Box, Disch, McQuinn and O’Toole examine the sectoral contribution to corporation tax receipts in the Irish economy. This highlights the increasingly concentrated nature of these returns. • The domestic labour market continues to display a significant degree of resilience. While the ICT sector experienced a significant fall in the numbers employed during 2022, employment levels in the sector appeared to recover swiftly by the end of the year. Employment numbers also show a substantial increase in those employed in the pharmaceutical sector since the onset of the pandemic. • The higher-than-expected growth rate in the domestic economy does give rise to concerns about overheating over the short- to medium-term. The economy has performed particularly well during the pandemic and appears to have weathered the energy crisis emanating from the war in Ukraine. • In a Research Note to the Commentary, Walsh and Brick estimate the amount of inpatient bed capacity in Ireland in 2023. Their analysis reveals that in the present year there may be a bed capacity deficit of approximately 1,000 inpatient beds. They outline a number of policy measures to address this issue. 8 | Quarterly Economic Commentary – Spring 2023 FIGURE 4 FINAL CONSUMPTION EXPENDITURE OF HOUSEHOLDS FOR DURABLE GOODS, NONDURABLE GOODS AND SERVICES: ANNUAL GROWTH RATE (CHAIN-LINKED VOLUMES, INDEX 2015 = 100, SEASONALLY AND CALENDAR ADJUSTED) Source: Eurostat. Note: Unit is chain linked volumes. The savings ratio in Ireland increased significantly during the pandemic as consumption was greatly reduced due to public health restrictions, especially in Q2 2020 and Q1 2021 (Figure 5). The domestic savings ratio started to decline gradually throughout the latter half of 2021 as public health restrictions were lifted. The savings ratio continued to fall gradually throughout 2022. This may have been due to households using their savings to cushion against the heightened inflationary pressures brought about by the Russian invasion of Ukraine. In Q4 2022, while still above the pre-pandemic level, the Irish savings ratio was down 5.3 per cent year-on-year. The overall savings ratio fell from 24.5 per cent in 2021 to 20.6 per cent in 2022. -15% -10% -5% 0% 5% 10% 15% 20% 2021-Q1 2021-Q2 2021-Q3 2021-Q4 2022-Q1 2022-Q2 2022-Q3 2022-Q4 Durable Goods Services Non-Durable Goods Quarterly Economic Commentary – Spring 2023 | 9 FIGURE 5 SAVINGS RATIO (SEASONALLY-ADJUSTED) (%) – IRELAND. Source: Central Statistics Office. Ireland’s official savings ratio is higher than other indicators of savings across euro area countries. However, as noted by Timoney (2022), 3 this could be a consequence of consumption being underestimated due to inaccurate weighting in the consumption basket since the pandemic. When compared to our European peers (Figure 6), Ireland’s savings ratio (20.4 per cent) is at a much higher rate than both that of the EU (12.6 per cent) and of the euro area (13.4 per cent). If the level of savings in the domestic economy is in fact overestimated, this means that, while households are likely to still have high savings and be able to reduce the savings ratios to maintain consumption as the cost-of-living pressures tighten, the extent of this ‘capacity’ is less than the headline rate suggests. FIGURE 6 SAVINGS RATIO (SEASONALLY AND CALENDARLY ADJUSTED) – IRELAND, EU AND EURO AREA Source: Eurostat and authors’ calculations. 3 See: https://www.fiscalcouncil.ie/wp-content/uploads/2022/11/Household-Consumption-and-Savings-in-Ireland- Since-the-COVID-19-Pandemic-Fiscal-Council-Analytical-Note-18-by-Kevin-Timoney.pdf. 0 5 10 15 20 25 30 35 40 0% 5% 10% 15% 20% 25% 30% 35% 40% European Union Euro Area Ireland 10 | Quarterly Economic Commentary – Spring 2023 While fears of an international recession may have diminished somewhat, there is still uncertainty around the future rate of inflation. Households’ use of the increased savings accumulated since the pandemic will likely vary across the income distribution; many lower income households may have to use their savings to withstand the increased cost of living, while also having to reduce their consumption levels. On the other hand, many higher-income households may be able to withstand the increased cost of living by using a proportion of their savings without having to reduce their consumption levels. Figure 7 compares different income quartiles’ expectations of their financial situation over the next 12 months. In January 2023, after an improvement in sentiment since the lowest dip seen in September 2022, the 1st quartile (the lowest income bracket) is expecting to be in a worse financial situation in the next 12 months than the other quartiles expect to be in. FIGURE 7 FINANCIAL SITUATION CONFIDENCE BY QUARTILE (SEASONALLY ADJUSTED) Source: Eurostat and authors’ calculations. As shown in Figure 8, consumer confidence also dipped significantly at the start of 2022 in both Ireland and the EU, with heightened global uncertainty due to inflationary pressures and geopolitical insecurity, both of which stem from the Russian invasion of Ukraine in February 2022. While consumer confidence has generally been improving since Q3 2022, in January 2023 Ireland’s consumer confidence was lower than that of the EU’s, and was lower than its level in January 2022. 40 50 60 70 80 90 100 110 120 1st 2nd 3rd 4th Quarterly Economic Commentary – Spring 2023 | 11 FIGURE 8 CONSUMER CONFIDENCE INDICATOR Source: European Commission. Consumption forecasts Despite ongoing economic uncertainties, the economy is growing at a stronger pace at the start of 2023 than previously expected, with inflation forecast to be lower in 2023 than originally assumed. This lower level of inflation will likely increase consumption; thus, consumption is forecasted to grow by 4.7 per cent in 2023 and 5.0 per cent in 2024. We expect the savings ratio to decline somewhat next year and again in 2024, as households continue to cushion their expenditure levels by reducing savings. 60 70 80 90 100 110 120 EU IE 12 | Quarterly Economic Commentary – Spring 2023 TRADED SECTOR Key Points • Irish net exports were €187 billion in 2022, up €11 billion on 2021. • Imports for the year grew by 23.6 per cent, driven by R&D related imports throughout 2022. • Export activity may moderate in 2023 due to continued monetary tightening by the European Central Bank. Import and export activity Annual export growth has been consistent over several years and continued to grow by double digits in 2022, with exports increasing by 20.1 per cent. This strong showing from the export sector was a large reason for the country’s economic growth in 2022. Net exports in 2022 amounted to €187 billion, up from €176 billion in 2021. This growth in net exports is on the back of significant annual growth in 2021, when exports increased by 150 per cent. Figure 9 shows the annual growth in Irish exports by quarter as well as the level of exports. The growth in the level of services exports slowed in 2021 and 2022, while exports of goods has continued to grow throughout 2021 and 2022. The growth in exports in 2022 was, therefore, largely driven by exports of goods. In Q4 2022, exports of goods and services increased by 15 per cent and 1.1 per cent on an annual basis, respectively. This is likely due to a slowdown in activity in the ICT sector, which has been highlighted by a number of announcements from large firms in the sector regarding substantial staff layoffs. On the other hand, the Pharmaceutical and chemicals sector, as well as the Food sector, have maintained their strong economic performance, shown by the continued increases in exports of goods. Quarterly Economic Commentary – Spring 2023 | 13 FIGURE 9 SEASONALLY-ADJUSTED EXPORTS (VOLUME, % CHANGE YEAR-ON-YEAR) Source: Central Statistics Office, Quarterly National Accounts. As has been the case for some time now, Irish exports are heavily influenced by pharmaceutical-related and ICT industries. Figure 10 provides a breakdown of the value and annual growth rates of goods exports by these industries and all other goods. FIGURE 10 GOODS EXPORTS: COMPONENT VALUE AND GROWTH RATE (% CHANGE YEAR-ON- YEAR) Source: Central Statistics Office, Current Account: Merchandise and Services. 0% 5% 10% 15% 20% 25% 30% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Export of Goods (excluding Factor Income Flows) Euro Million Export of Services (excluding Factor Income Flows) Euro Million Exports of Goods and Services Growth rate (Y-on-Y) (RHS) -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 0 10 20 30 40 50 60 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 GROWTH RATE (Y-ON-Y) TOTAL VALUE, €BN Chemicals & Pharma All other goods Chemicals & Pharma All other goods 14 | Quarterly Economic Commentary – Spring 2023 Chemicals and pharma-related goods accounted for 57 per cent of goods exports in 2022, with a total value of over €118 billion. Exports of these pharma-related goods increased by 33 per cent compared to 2021. The value of all other goods, which includes food, machinery, manufactured articles and all other commodities, was €90 billion in 2022. This is an annual increase of 17 per cent. In services exports, a similar pattern of sectoral concentration emerges, with computer services from the ICT sector accounting for a large proportion of services exports. This is shown in Figure 11. FIGURE 11 SERVICE EXPORTS: COMPONENT VALUE AND GROWTH RATE (% CHANGE YEAR-ON- YEAR) Source: Central Statistics Office, Current Account: Merchandise and Services. Figure 12 shows the annual change in seasonally-adjusted imports of goods and services. Imports grew by 23.6 per cent in 2022. This reflects the increasing levels of consumption after two years of declining imports due mainly to the effects of the COVID-19 pandemic. As illustrated in Figure 12, the growth in imports in 2022 has been driven by both goods and services. Imports of goods grew by 23 per cent in 2022 while imports of services grew by 17 per cent. -20% -10% 0% 10% 20% 30% 40% 50% 0 10 20 30 40 50 60 70 80 90 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 GROWTH RATE (Y-ON-Y %) TOTAL VALUE, € BN Computer services All other services Computer services All other services Quarterly Economic Commentary – Spring 2023 | 15 FIGURE 12 SEASONALLY-ADJUSTED IMPORTS (VOLUME, % CHANGE YEAR-ON-YEAR) Source: Central Statistics Office. The value of imports also increased, with an increase of €95.1 billion in 2022. Goods imports amounted to €128.6 billion in 2022, an increase of €24.4 billion compared to 2021. Pharmaceutical-related goods accounted for €30.4 billion, or 24 per cent, of goods imports. Machinery and transport also represented a large share of goods imports, with €50.1 billion of machinery and transport imports in 2022, representing 39 per cent of goods imports. These contributions are illustrated in Figure 13. FIGURE 13 GOODS IMPORTS BY COMMODITY GROUP (VALUE, € BILLION) Source: Central Statistics Office. -100% -50% 0% 50% 100% 150% Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Import of Goods Import of Services Imports of Goods and Services -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 0 5 10 15 20 25 30 35 40 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 GROWTH RATE (Y-ON-Y %) TOTAL VALUE, €BN Chemicals & pharma related Machinery and transport All other goods Chemicals & pharma related Machinery and transport All other goods 16 | Quarterly Economic Commentary – Spring 2023 Services imports increased by €49.8 billion on an annual basis, amounting to €335.8 billion in 2022. Much of the growth in the value of services imports over the last couple of years can be attributed to the large imports of research and development related business services, as well as royalties/licenses. These ‘business services’ imports accounted for €153 billion in 2022 compared to €124 billion in 2021. Business services accounts for over 40 per cent of service imports. Royalties and/or licenses also contribute heavily to services imports, and they make up a further 37 per cent. Therefore, the ICT sector is influential in both the imports and exports of services. The breakdown of services imports is shown in Figure 14. FIGURE 14 SERVICE IMPORTS BY COMMODITY GROUP (VALUE, € MILLION) Source: Central Statistics Office. Note: ‘All other services’ relate to transport, tourism and travel, communications, insurance, financial services, computer services, and other services. Given the international nature of many firms in these sectors, a certain level of globalisation activities affect the Irish National Accounts. It is important to examine the headline Irish trade data without these globalisation effects. To do this, certain accounts have been identified as ‘globalisation activities’ whereas other accounts have been identified as ‘non-globalisation’. The globalisation activities comprise of merchanting and contract manufacturing, royalties/licensing, and R&D and leasing. The omission of these elements from exports and imports leaves non-globalisation elements of trade – services and international trade. Exports from globalisation activities accounts increased by 18.5 per cent in 2022 and represented 26.3 per cent of total exports. They amounted to €181 billion in 2022. The vast majority of these exports arises from merchanting and contract -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 0 20 40 60 80 100 120 140 160 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 GROWTH RATE (Y-ON-Y %) VALUE, €BN Royalties/licenses All business services All other services Royalties/licenses All business services All other services Quarterly Economic Commentary – Spring 2023 | 17 manufacturing. Merchanting refers to net sales by Irish merchants of foreign goods bought from and sold to non-residents without entering or leaving Ireland. 4 Contract manufacturing refers to a company in Ireland engaging a company abroad to manufacture products on its behalf (and vice versa). 5 The shares of the globalisation activities and non-globalisation accounts to overall exports are shown in Figure 15. Clearly, the effects of globalisation activities accounts are notable, however the majority of exports can be attributed to non-globalisation trade activity. FIGURE 15 SHARE OF ‘GLOBALISATION’ AND ‘NON-GLOBALISATION’ A/C TO OVERALL EXPORTS Source: Central Statistics Office. Imports, on the other hand, are more heavily affected by the practices of large multinational enterprises. Imports from the identified globalisation accounts amounted to €212 billion in 2022, increasing by 22.3 per cent on 2021. This accounted for 42.5 per cent of imports in 2022. The main element behind these figures is the importation of royalties and/or licenses. This is often due to intellectual property (IP), patents, and/or licenses being held by Irish firms, who charge a royalty or payment of some sort for use of IP or technologies by non-Irish firms/subsidiaries. The shares of the globalisation activities and non-globalisation accounts to overall imports are shown in Figure 16. 4 See: Central Statistics Office Balance of Payments for more information. 5 See Contract Manufacturing - rebrand.indd (cso.ie) for more information. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Merchanting/Contract Man. Royalties/License R&D and Leasing Services International Trade 24 | Quarterly Economic Commentary – Spring 2023 FIGURE 21 CONSTRUCTION OUTLOOK – CONFIDENCE INDEX – IRELAND VS EU Source: European Commission. The notable level of outstanding planning permissions for residential dwellings provide another source of potential growth for completions in 2024. It appears the number of planning permissions passing through to commencements has dropped back notably in recent years (Figure 22). This is likely to be impacted by many factors. However, if these permissions become activated following the easing of supply bottlenecks, this could provide a stimulus to completions in 2024. Continued State investment and policy action in the housing market may also provide upside momentum. There are, however, risks to this activation including the rising cost of financing, the high cost of construction and other land market constraints which may all threaten the viability of sites and thus the activation of the building process. FIGURE 22 PLANNING PERMISSIONS, COMMENCEMENTS AND COMPLETIONS Source: Central Statistics Office 0 20 40 60 80 100 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 None Insufficient demand Weather conditions Shortage of labour force Shortage of material and/or equipment Other factors Financial constraints Issues facing the construction sector (% of responses) 0 10,000 20,000 30,000 40,000 50,000 2015 2016 2017 2018 2019 2020 2021 2022 Planning Permissions Completions Commencements Quarterly Economic Commentary – Spring 2023 | 25 Given the level of commencements in 2022, we forecast 27,000 new housing completions in 2023. For 2024, due to the moderation in some of the constraining factors, and the continued State commitment to housing provision, we expect a rebound to 31,000 new housing units for 2024. However, there are numerous risks on the downside to these forecasts (such as the interest rate increases, broad financial stress and further inflationary factors). Investment forecasts Our forecasts for 2023 and 2024 for investment are presented in Figure 23. Given the strong investment experienced in 2022, we expect modified (MI) and nonmodified investment (I) to grow this year but at a much-reduced rate, reflecting the growing downside factors. We expect MI to grow by 3.5 per cent in 2023 and overall investment to growth by 5.6 per cent. For 2024, our forecast for MI is 4.5 per cent growth and for I is 6.3 per cent growth. FIGURE 23 FORECASTS FOR INVESTMENT (% CHANGE YEAR-ON-YEAR) Source: Central Statistics Office and QEC Authors. -9% 8% 20% 3.5% 4.5% -17% -39% 26% 5.6% 6.3% 2020 2021 2022 2023 (F) 2024 (F) Modified Investment Total Investment 26 | Quarterly Economic Commentary – Spring 2023 LABOUR MARKET Key Points • Historically low levels of unemployment are expected to continue through 2024. • Employment in some sectors, such as pharma-related activities, have rebounded considerably since the pandemic. • Other sectors such as accommodation and food services have yet to fully recover. • Overall wage growth increased 3.3 per cent in 2022. • Further wage growth is expected in 2023. Rapid employment growth The first few months of 2023 have been marked by continued resilience and buoyancy in the labour market; the unemployment rate was 4.3 per cent in February 2023 (Figure 24) and has remained around 4 per cent for a number of months. FIGURE 24 UNEMPLOYMENT RATE BY MONTH (SEASONALLY-ADJUSTED, %) Sources: Seasonally-Adjusted Monthly Unemployment Rate Series for ages 15-74. Central Statistics Office. Note: The COVID-19 Adjusted Monthly Unemployment Rate Series is used for the period March 2020 – February 2022. Alongside the dramatic recovery in the unemployment rate since the pandemic, the number of persons employed has increased significantly. Approximately 2.5 million people were employed in 2022, an increase of 6.6 per cent from 2021 0 5 10 15 20 25 30 35 2019M01 2019M03 2019M05 2019M07 2019M09 2019M11 2020M01 2020M03 2020M05 2020M07 2020M09 2020M11 2021M01 2021M03 2021M05 2021M07 2021M09 2021M11 2022M01 2022M03 2022M05 2022M07 2022M09 2022M11 2023M01 Monthly Unemployment Covid adjusted unemployment Quarterly Economic Commentary – Spring 2023 | 27 and 9.9 per cent from 2019. Figure 25 shows the breakdown of these changes in employment by sector. While most sectors now exceed their pre-COVID employment levels, one notable exception is Accommodation and food services. Despite employment increasing by 20 per cent in 2022 compared to 2021 (+27,900 persons), there are roughly 10,100 fewer persons employed in the sector compared to 2019. While there were high profile job losses in Q3 2022 amongst some large ICT firms (-10,900 persons from Q2 2022), a large share of these workers appeared to be re-hired within the sector in Q4 2022 (+9,700 persons). Overall, employment in the ICT sector in 2022 increased 9.5 per cent compared to 2021 and 32.2 per cent from 2019. The Health and social work sector accounted for the largest share of total employment in 2022 (13.0 per cent or over 332,000 workers). This sector has also had one of the largest increases in total employment, with 43,000 additional workers employed in the sector since 2019. The Industry sector, which is largely comprised of manufacturing activities, had the second largest share of workers in 2022 (over 332,000 workers). Employment in the sector increased 12.2 per cent from 2019 to 2022, an increase of 35,000 workers. Increasingly, employment related to pharma-related activities has been driving this trend. Figure 26 shows the increase in employment in the manufacturing of basic pharmaceuticals products and pharmaceutical preparations, a subsector of the Industry sector. Prior to 2020, this subsector accounted for approximately 15 per cent of total Industry employment. In just the past two years, it has increased to 20 per cent, employing over 63,000 workers in 2022. 28 | Quarterly Economic Commentary – Spring 2023 FIGURE 25 EMPLOYMENT BY SECTOR (PERSONS EMPLOYED, THOUSANDS) Sources: Labour force survey, Central Statistics Office. FIGURE 26 EMPLOYMENT IN PHARMA-RELATED ACTIVITIES Sources: Eurostat (Labour Force Survey by NACE Rev. 2) and Central Statistics Office. Note: Pharma-related employment relates to those employed in manufacturing of basic pharmaceutical products and pharmaceutical preparations. 050 100 150 200 250 300 350 Agriculture/forestry/fishing Admin & support services Transport & storage Other NACE activities Finance/insurance/real estate activities Public admin & defence Information & communication Construction Professional/science/tech activities Accommodation & food service Education Wholesale & retail trade Industry Health & social work 2022 2021 2019 0% 5% 10% 15% 20% 25% 0 10 20 30 40 50 60 70 2009-Q1 2009-Q3 2010-Q1 2010-Q3 2011-Q1 2011-Q3 2012-Q1 2012-Q3 2013-Q1 2013-Q3 2014-Q1 2014-Q3 2015-Q1 2015-Q3 2016-Q1 2016-Q3 2017-Q1 2017-Q3 2018-Q1 2018-Q3 2019-Q1 2019-Q3 2020-Q1 2020-Q3 2021-Q1 2021-Q3 2022-Q1 2022-Q3 Persons employed (thousands) Pharma-related employment Share of Industry Employment (RHS) Quarterly Economic Commentary – Spring 2023 | 29 Vacancies beginning to slow A key development in the post-COVID recovery of the labour market was the unprecedented increase in vacancy rates, as the reopening of the economy resulted in a rush to fill workforce needs. Figure 27 shows the significant increase in job vacancies across all sectors from early 2021, reaching a peak of 34,300 vacancies in Q2 2022. While total vacancies in Q4 2022 declined significantly on a quarterly basis (-17.9 per cent), total vacancies remain elevated on a historical basis. FIGURE 27 JOB VACANCIES, ALL SECTORS Sources: Central Statistics Office. By sector, the differences in hiring patterns are quite interesting. Vacancy rates in the Professional, scientific and technical activities sector was the highest of all sectors in 2022. On average, this sector had 4,625 job vacancies and a vacancy rate of 3.7 per cent in 2022. As shown in Figure 28, job vacancies across most sectors in 2022 were far above 2021 and 2019 even as employment levels in most sectors have grown far above their pre-pandemic levels. One notable exception is the Accommodation and food services sector; as noted above, this sector has not seen employment recover from 2019 and is also one of the only sectors to have fewer job vacancies listed in 2022 than 2021. 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 30 | Quarterly Economic Commentary – Spring 2023 FIGURE 28 JOB VACANCIES BY SECTOR Source: Central Statistics Office. Developments in wages As noted in our Autumn Commentary, wage growth tends to increase as vacancy rates increase. Given the substantial rise in the cost of living, it is important to assess whether wages are keeping pace with inflation. It is also important to gauge whether wage growth in some sectors may be contributing to further inflationary pressures. Figure 29 shows the level and annual growth rate of average weekly wages from 2009 through 2022. Weekly wages have been increasing since 2014, with a peak growth rate of 5.2 per cent in 2020. In 2022, average weekly wages increased to just over €880 (+3.3 per cent from 2021). Due to some distortions in wage data during COVID, it is also useful to compare wages in 2022 to their pre-pandemic average in 2019. Over this period, average weekly earnings increased 13.8 per cent. 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Arts/entertainment/other services Transport & storage Accommodation & food service Admin & support Construction ICT Industry Health & social work Education Wholesale & retail trade Finance/insurance/real estate Public admin & defence Professional/scientific/tech 2022 2021 2019 Quarterly Economic Commentary – Spring 2023 | 31 FIGURE 29 AVERAGE WEEKLY EARNINGS Sources: Central Statistics Office. While wages across all sectors have increased compared to pre-pandemic levels, this growth varies considerably across sectors. With an inflation rate of 7.8 per cent in 2022, just two sectors experienced real earnings growth last year. Wages in ICT, the highest across all sectors, grew by 9.8 per cent in 2022, while wage growth in the Transport and storage sector was 8.6 per cent. While wage growth in the Accommodation and food service sector outpaced growth across all sectors (4.4 per cent compared to 3.3 per cent), average weekly wages in this sector were 53.8 per cent lower than those across all sectors (€408 vs €881). However, it is worth noting that significant changes in employment levels by sector, such as the occurrence of large layoffs, may lead to compositional changes in earnings. Nevertheless, differences in earnings growth will continue to have distributional impacts as households face persistently high living costs through 2023. -2% -1% 0% 1% 2% 3% 4% 5% 6% 0 100 200 300 400 500 600 700 800 900 1000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Level Growth Rate (Y-on-Y %) 32 | Quarterly Economic Commentary – Spring 2023 FIGURE 30 AVERAGE WEEKLY EARNINGS BY SECTOR (€) Sources: Central Statistics Office. Differences in wages are also evident when we look at firm size. Figure 31 compares the levels and annual growth rates of weekly earnings across firm size. In general, earnings growth amongst firms with over 250 workers has been less volatile than among smaller firms, and earnings are typically significantly higher in these firms. In 2022, average weekly wages amongst firms with less than 50 workers were €694. This is just over 15 per cent less than wages in firms with 50-250 workers (€823/week) and over 30 per cent less than wages in firms with over 250 workers (€1,010/week). 0% 2% 4% 6% 8% 10% 12% 0 200 400 600 800 1,000 1,200 1,400 1,600 Wage growth (%) Average weekly earnings (€) 2019 2021 2022 Earnings growth (2022, RHS) Quarterly Economic Commentary – Spring 2023 | 33 FIGURE 31 AVERAGE WAGES BY FIRM SIZE Sources: Central Statistics Office. Labour outlook Given the rapid recovery of the labour market throughout 2022 and stronger-than- anticipated economic activity in the first few months of 2023, we anticipate continued strength in the labour market. We now anticipate an unemployment rate of 4.2 per cent and 4.0 per cent in 2023 and 2024, respectively. As outlined in the risk assessment, downside risks to this forecast include a potential slowdown in certain domestic sectors as investment activity cools in 2023 compared to 2022 and uncertainty remains high. -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 0 200 400 600 800 1,000 1,200 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 % Growth (Y-on-Y) Average Weekly Earnings <50 50-250 >250 40 | Quarterly Economic Commentary – Spring 2023 month of month-on-month declines in the price of energy products from their peak in November 2022. The recent declines in energy prices suggest that the traditional measure of CPI may be overstating the jumps in price that occurred earlier in 2022. Figure A.3 shows the wide range in the inflation rates for energy products when we apply our estimates of instantaneous inflation. Compared to the traditional measure which indicates that energy prices are nearly 30 per cent higher than their level in February 2022, our alternative weights give a measure of 11.6 and 4.8. When the recent declines in prices are weighted most heavily (a=4), then we see deflation in the energy series of 2.4 per cent. FIGURE A.3 ANNUAL IRISH INFLATION RATES FOR ENERGY PRODUCTS (%): M1 2022 – M2 2023 Source: Central Statistics Office and QEC calculations. When we look at the food series, a very different effect can be seen. Unlike energy products, which have begun to experience declining prices in recent months, food prices have continued to increase at a steady pace in the year to February 2023. Therefore the separate estimates of food prices are much less varied; each measure indicates that in February 2023 food prices were approximately 12 per cent above their level in February 2022. -20 0 20 40 60 80 100 2022 January 2022 February 2022 March 2022 April 2022 May 2022 June 2022 July 2022 August 2022 September 2022 October 2022 November 2022 December 2023 January 2023 February a0 a1 a2 a4 Quarterly Economic Commentary – Spring 2023 | 41 FIGURE A.4 ANNUAL IRISH INFLATION RATES FOR FOOD (%): M1 2022 – M2 2023 Source: Central Statistics Office and QEC calculations. Concluding comments The volatile nature of recent inflation rates makes a precise estimate of present inflationary pressures difficult to gauge. There is always a danger with monetary policy that policy actions such as making a change to official policy rates can operate with a lag, i.e. that by the time the change in the policy rate is effective, the inflationary period which prompted the change has passed. This danger is accentuated if current estimates of inflation are unduly influenced by historical estimates. Therefore it is useful to accompany the standard measures of inflation with estimates such as the instantaneous inflation presented in this Box, to provide a gauge of price developments after a period of exceptional volatility. References: Blanchard O. (2022). ‘Why I worry about inflation, interest rates, and unemployment’. Peterson Institute for International Economics blog: https://www.piie.com/blogs/realtime-economic-issues-watch/why-i-worry-about- inflation-interest-rates-and-unemployment. Eeckhout J. (2023). ‘Instantaneous inflation’, Working Paper Universitat Pompeu Fabra (UPF) Barcelona. Härdle W. (1990). Applied nonparametric regression, Cambridge University Press. Obstfeld M. (2022). ‘Uncoordinated monetary policies risk a historic global slowdown’. Peterson Institute for International Economics blog: https://www.piie.com/blogs/realtime-economic-issues-watch/uncoordinatedmonetary-policies-risk-historic-global-slowdown. Silverman B. (1986). Density estimation for statistics and data analysis, Chapman and Hall. This Box was prepared by Wendy Disch and Kieran McQuinn. 0 2 4 6 8 10 12 14 16 18 2022 January 2022 February 2022 March 2022 April 2022 May 2022 June 2022 July 2022 August 2022 September 2022 October 2022 November 2022 December 2023 January 2023 February a0 a1 a2 a4 42 | Quarterly Economic Commentary – Spring 2023 While the inflation rate is expected to moderate more quickly than previously anticipated, overall price levels remain historically high, presenting vulnerable households with significant challenges in meeting cost of living pressures. In the following Box, Doorley et al. assess the impact of recent cost of living measures across households. BOX B THE DISTRIBUTIONAL IMPACT OF THE FEBRUARY COST-OF-LIVING PACKAGE On 21 February 2023, leaders of the three coalition parties announced a suite of new cost- of-living (COL) measures designed to aid businesses, families struggling with the cost of living and vulnerable groups on fixed incomes. The package, at an estimated total cost of €1.2 billion (Department of the Taoiseach, 2022), is comprised of a mix of lump-sum payments to social welfare recipients, extensions to cuts on VAT and excise duties, supports directed at businesses, and measures aimed at families with children of schoolgoing age. This Box presents a distributional analysis of this package, both in terms of the average effects on household incomes and on the aggregate effects across the income distribution. A brief summary of the measures announced follows. A €200 lump-sum payment will be made to recipients of long-term social welfare payments, while a €100 lump-sum payment will be made to recipients of Child Benefit (on a per-child basis) and the Back to School Clothing and Footwear Allowance. The reduction of VAT on gas and electricity from 13.5 per cent to 9 per cent will be extended to 31 October, and the reduction of VAT on hospitality from 13.5 per cent to 9 per cent will be extended to 31 August. There will also be a phased reintroduction of the full rates of excise on petrol, diesel, and market gas oil, with rate increases at the beginning of June, September, and October. For businesses there will be an extension of the Temporary Business Energy Support Scheme to May 31, along with a reduction in the qualifying threshold and an increase in the level of relief; a new grant will be introduced for businesses using kerosene or liquefied petroleum gas. Finally, charges on school transport will be reduced for children in primary and secondary school relative to the academic year 2021-2022 (charges had been suspended for 2022-2023), and the Hot School Meals programme will be extended to DEIS primary schools. We model the effect of a number of these policies on household disposable income using SWITCH, the ESRI’s tax-benefit microsimulation model, and ITSIM, an indirect tax microsimulation model developed jointly by the ESRI and the Department of Finance. SWITCH is linked to data from the 2019 Survey of Income and Living Conditions (SILC), with the data adjusted in terms of structure and incomes to be representative of the 2023 population. ITSIM uses the latest available wave of the CSO’s nationally representative Household Budget Survey (HBS)10 to estimate the quantity of indirect taxes (VAT, excise duties, and carbon tax) paid by Irish households. In modelling the COL package, we include the following components: 10 The 2015-2016 wave. Quarterly Economic Commentary – Spring 2023 | 43 • Lump-sum payments of €100 for recipients of Child Benefit and the Back-to-School Clothing and Footwear Allowance11 and of €200 for recipients of long-term social welfare payments (for a full list see Citizen’s Information, 2023), and Working Family Payment. • Extensions to the reduced rates of VAT on gas, electricity, and hospitality and of excise on diesel, petrol, and market gas oil. Given our focus is on the distributional impact on households, supports directed at businesses are not modelled. Data limitations and conceptual difficulties mean we do not model the extension of the Hot School Meals programme or the reduced charges on school transport. Excluding the grant on LPG / kerosene, we estimate that the cost of measures not modelled is less than €82 million and that we model at least 90 per cent of the package.12 Figures B.1 and B.2 show the results of this analysis. Households are ranked from the poorest tenth of the population (decile 1) to the richest tenth (decile 10). Figure B.1 presents the average change in disposable income by income decile, expressed as a percentage of household income; Figure B.2 presents the aggregate change in disposable income by income decile, expressed in euro per annum. In each case, the reforms are compared to the 2023 tax-benefit system before these additional COL measures were introduced. FIGURE B.1 DISTRIBUTIONAL IMPACT OF FEBRUARY COST-OF-LIVING PACKAGE BY INCOME DECILE; AVERAGE % CHANGE IN HOUSEHOLD DISPOSABLE INCOME Source: Authors’ calculations using ITSim linked to the 2015-2016 Household Budget Survey and SWITCH run on 2019 Survey of Income and Living Conditions data. Notes: Deciles are based on equivalised household income, using CSO national equivalence scales. 11 The Back to School Clothing and Footwear Allowance is cumulated with a number of other small social welfare schemes in the data underlying SWITCH (carer’s benefit, deserted wife’s allowance, deserted wife’s benefit, guardian’s contributory payment, guardian’s non-contributory payment). Since recipients of all of these payments receive a €200 lump-sum apart from the Back to School Clothing and Footwear Allowance, we assign a €200 lump-sum to recipients of this aggregated payment. 12 Estimated costs of these measures, or estimates used to bound the costs, are presented in Dáil Debate 24 May 2022, Questions 467-471; Dáil Debate 12 July 2022, Questions 532, 558, 563; and Department of Finance and Department of Enterprise, Trade, and Employment, 2023. No costing for the grant on LPG / kerosene was available at the time of writing. 0.00 0.50 1.00 1.50 2.00 2.50 12345678910 All % change in disposable income Decile of equivalised household disposable income COL Direct Measures COL Indirect Measures Overall Effect 44 | Quarterly Economic Commentary – Spring 2023 On average, households can expect to gain around 0.7 per cent of disposable income as a result of the COL package. The measures are progressive. The bottom income decile gains around 2 per cent of disposable income while the top decile gains around 0.3 per cent of disposable income. The direct welfare measures in the COL package – lump-sum payments to recipients of certain social welfare benefits – drive this progressivity, reflecting the targeted nature of these changes. The indirect measures exhibit a somewhat weaker progressivity. While the bottom decile gains most and the top decile gains least; there is little difference in gains by other deciles groups. FIGURE B.2 DISTRIBUTIONAL IMPACT OF FEBRUARY COST-OF-LIVING PACKAGE BY INCOME DECILE; CHANGE IN ANNUAL DISPOSABLE HOUSEHOLD INCOME Source: Authors’ calculations using ITSim linked to the 2015-2016 Household Budget Survey and SWITCH run on 2019 Survey of Income and Living Conditions data. Notes: Deciles are based on equivalised household income, using CSO national equivalence scales. Figure B.2 presents the average cash effect of the COL measures on the annual disposable income of households in each income decile. By this measure, the COL package is neither strongly progressive nor regressive: the effect is somewhat uniform in cash terms across deciles, with slightly higher gains in the middle of the income distribution. So, while the package represents a larger proportion of disposable income for low-income households, it is similar in cash terms for low- and high-income households. This is primarily due to the effect of the indirect measures: households higher in the income distribution spend more in absolute terms on the goods for which excise and VAT cuts have been extended, i.e. energy products and hospitality. Accordingly, these households stand to benefit more in absolute terms from measures which, effectively, provide a discount on such goods. We estimate the effect of the direct welfare measures to be more than twice as generous in cash terms for low-income compared to high-income households. For indirect taxation measures, the opposite is true. Budget 2023 insulated households, on average, from expected inflation in 2023 through a range of permanent and one-off measures (Doolan et al., 2022). The February COL package – which contains further temporary measures – benefits low-income households relatively more than high income households. However, the cost of the COL package is relatively 0 50 100 150 200 250 300 350 400 450 500 12345678910 All Change in household disposable income (€p.a.) Decile of equivalised household disposable income COL Direct COL Indirect COL Package Total Quarterly Economic Commentary – Spring 2023 | 45 evenly distributed across the income distribution so that high income households gain the same in cash terms as low-income households. The recent rise in inflation has disproportionately affected lower-income households with Lydon (2022), Doorley et. al. (2022) and CSO (2022) estimating that inflation rates are 0.8-1.5 percentage points higher at the bottom of the income distribution than at the top. The targeting of any future COL measures should be carefully considered to reduce the risk of adding additional demandside inflationary pressures to the economy. Budget 2024 should consider the core rates of social welfare payments which have not increased in line with inflation in recent years and which risk eroding the permanent living standards of those on fixed incomes once temporary measures have expired. References Central Statistics Office (2022). ‘Estimated Inflation by Household Characteristics, September 2022’. Available at: Estimated Inflation by Household Characteristics September 2022 - CSO - Central Statistics Office. Citizen’s Information (2023). ‘Christmas Bonus’. Available at: Christmas Bonus (citizensinformation.ie). Department of Finance and Department of Enterprise, Trade, and Employment (2023). ‘€9.5 million approved for payment to businesses under government’s new energy support scheme’. Available at: gov.ie - €9.5 million approved for payment to businesses under government’s new energy support scheme (www.gov.ie). Department of the Taoiseach (2023). ‘Government announces new cost-of-living measures for families, businesses, and the most vulnerable’. Available at: gov.ie – Government announces new cost-of-living measures for families, businesses and the most vulnerable (www.gov.ie). Doolan, M., K. Doorley, M. Regan and B. Roantree (2022). ‘Distributional impact of tax and welfare policies: Budget 2023’, Quarterly Economic Commentary Winter 2022. Doorley, K., M. Regan and B. Roantree (2022). ‘The distributional effects of inflation and prospects for income growth’, Box B in Quarterly Economic Commentary Spring 2022. Lydon R. (2022). ‘Household characteristics, Irish inflation and the cost of living’. Economic Letter Vol. 2022(1). Central Bank of Ireland. This Box was prepared by Karina Doorley, Luke Duggan and Claire Keane. Outlook Recent indicators suggest that inflation is likely to moderate at a faster rate than previously expected in our Winter Commentary. As such, we have revised down our expectation of inflation to 4.5 per cent in 2023 and 3.5 per cent in 2024. Downside risks to this outlook include further disruptions in the European energy market or potential overheating in the domestic economy as consumption continues to grow beyond prior expectations. 46 | Quarterly Economic Commentary – Spring 2023 PUBLIC FINANCES Key Points • An Exchequer surplus of €5 billion was recorded in 2022. • Total tax receipts in 2022 amounted to €83.1 billion, which was 21.5 per cent higher than 2021. • Debt ratios projected to continue to fall 2023 and 2024. • Income tax, corporation tax and VAT continue to show signs of growth in 2023. Taxation receipts for 2022 saw strong growth across a range of tax headings despite economic disruptions in the form of cost-of-living pressures and interest rate increases. The level of tax revenues in 2022 was 21.5 per cent above those collected in 2021. This corresponds to an extra €14.7 billion in revenue. This increased level of receipts has been driven by income tax, VAT and in particular, corporation tax. Income tax for year amounted to €30.7 billion, which is €4.1 billion, or 15 per cent ahead of 2021. This is illustrative of the strength of the labour market, with unemployment continuing to fall and wages increasing. Exchequer receipts have continued to increase into 2023, with receipts for the first two months of the year coming in 7.5 per cent ahead of the same period in 2022. VAT receipts were also reflective of the significant recovery in consumption in 2022, with revenues of €18.6 billion recorded for 2022 compared to €15.4 billion in 2021 – a 20.5 per cent increase. These strong receipts have continued in 2023, with an increase of 21 per cent in VAT collected in the first two months of 2023 compared to the same period last year. The largest increase in tax revenue, however, came from large increases in corporation tax receipts. In 2022, they amounted to €22.6 billion compared to 15.3 billion in 2021, representing a €7.3 billion increase in corporation tax collected. This is a 48 per cent increase, which is a substantial increase, and in 2022 corporation tax became the second-largest source of tax revenue, overtaking VAT. The growth rates across the main tax headings are shown in Figure 35. Quarterly Economic Commentary – Spring 2023 | 47 FIGURE 35 GROWTH RATES OF MAIN TAXATION ITEMS Source: QEC calculations. Figure 36 presents the forecasts of the main taxation items for 2023 and 2024. FIGURE 36 FORECAST OF KEY TAXATION AGGREGATES Source: Department of Finance and QEC calculations. The forecasts above assume that the substantial growth of corporation tax will not continue. However given the continued profitability of large corporations across a wide range of sectors, as well as the strong receipts gathered in the first two -30 -20 -10 0 10 20 30 40 50 60 Income Tax Corporation Tax Valued Added Tax Excise Duty 2018 2019 2020 2021 2022 2023 (Forecast) -10 0 10 20 30 40 50 60 Income Tax Corporation Tax Valued Added Tax Excise Duty Total 2021 (Actual Growth %) 2022 (Actual Growth %) 2023 (Forecast Growth %) 2024 (Forecast Growth %) 48 | Quarterly Economic Commentary – Spring 2023 months of the year, modest growth in corporation tax is expected in 2023. Income tax is expected to continue to grow as wages increase this year and the labour market continues to perform strongly. Tax revenue, overall, is expected to increase in 2023 and 2024. Given the changing nature of the Irish tax revenue, it seems appropriate to examine some of the recent trends. The shares of each tax heading have changed over time, particularly since 2008. As shown in Figure 37, excise duty and VAT have declined as a share of total tax revenue. Income tax’s share increased throughout the 2010s in line with the economic recovery after the financial crash, and has remained relatively stable over the last number of years. Since 2014, corporation tax as a share of total Exchequer receipts has increased sharply, overtaking VAT in 2022, as mentioned previously. With the decline of the contribution of excise duty to total receipts, and the increases in that of corporation tax, much of Irish tax revenue is concentrated in the three largest tax headings – namely income tax, corporation tax and VAT. FIGURE 37 SHARE OF TOTAL EXCHEQUER RECEIPTS FOR MAIN TAX HEADINGS Source: QEC calculations. In the following Box by Disch, McQuinn and O’Toole, the greater concentration of Exchequer taxation receipts is examined using data from the Revenue Commissioners. 0 5 10 15 20 25 30 35 40 45 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Excise Duty Income Tax Corporation Tax Valued Added Tax Quarterly Economic Commentary – Spring 2023 | 49 BOX C ASSESSING THE CONCENTRATION OF CORPORATION TAXES BY SECTOR Background The substantial increase in corporation taxation receipts observed again in 2022 has compounded previously expressed concerns about the sustainability of this source of revenue stream for the Exchequer. Figure C.1 plots the share of total Exchequer receipts accounted for by corporation tax revenues from 1984 to the present. In recent years there has been a sharp and persistent increase in the share; from just over 11 per cent in 2014 to a record 27.5 per cent in 2022. Inevitably, this has given rise to question marks about the stability of such a source going forward. A Box in the Winter Commentary examined the performance of the ICT sector in the Irish economy focussing on the exceptional returns to that sector over the past 20 years (McQuinn, O’Toole and Disch, 2022). From a policy perspective, the establishment of a rainy-day fund in Budget 2023, where receipts deemed to be of a windfall nature are allocated to such a fund, is in direct, and appropriate, response to this issue. Recently, the Revenue Commissioners published a specific breakdown of corporation receipts over the period 2011–2021 according to NACE industrial sector specification. This allows us some further understanding of this increasingly important revenue stream for the State. Popular commentary in this area tends to indicate that the pharmaceutical and ICT sectors are two sectors where profit levels earned by multinationals are heavily influenced by tax related strategies as opposed to underlying economic activity (see Setser, 2020, for example). In this Box we examine these data to see if some insight can be provided as to the concentrated nature of corporation tax revenues from these sectors. Recent trends in sectoral taxation levels The growing importance of corporation tax revenue as a significant contributor to total Exchequer receipts can be seen in Figure C.1. While the share of these receipts increased gradually from the 1990s onward, they accounted for just over 13 per cent from 1995 to 2015. From 2015 onwards, the pace of growth clearly accelerated, as the level of receipts more than tripled from 2015 to 2022, resulting in a share of total tax receipts of 27.5 per cent in 2022. 56 | Quarterly Economic Commentary – Spring 2023 General Assessment Better than expected international environment Economies across most Western countries have performed at a stronger pace in the first quarter of 2023 than many had previously expected. Fears of a general international recession for the present year, which had grown towards the end of 2022, now appear to have receded. From the domestic economy’s perspective this is good news, with international trade now set to contribute more robustly to Irish economic growth in 2023 than was forecast in the previous Commentary. Some of the main reasons for the better-than-expected outlook have been the easing of energy prices experienced across Western economies to date in 2023 and the improvements in supply bottlenecks in areas such as car manufacturing. However, the overall international outlook for inflation in 2023 is still somewhat uncertain. While energy-related pressures are clearly abating, there is growing evidence of second round effects, with estimates of core inflation still remaining quite high. The presence of second round effects may have implications for the proposed response of monetary authorities to the inflation issue as these inflationary pressures may be more challenging to subdue. Nonetheless inflation rates both from an international and domestic perspective are set to be lower in 2023 than had been expected at the end of 2022. As far as the domestic economy is concerned, the relatively lower rate of inflation will likely result in greater rates of household consumption than previously expected, thereby also leading to greater rates of overall economic growth. Modified investment, which had grown very strongly throughout 2022, is expected to grow at a slower pace in 2023, however it will also contribute to growth in the present year. Therefore, we now believe modified domestic demand (MDD) will grow by 3.8 per cent in 2023, with our preliminary forecast for 2024 indicating a growth rate of 3.9 per cent in MDD. The stronger pace of growth in 2024 reflects the expected continued slowing of inflationary pressures and the resulting tempering of monetary policy tightening by central banks. This will exert further downward pressure on an already very low rate of unemployment in the Irish labour market; we now believe unemployment will be at 4.2 per cent in 2023 before falling further to a historical low of 4.0 per cent next year. The historically low rates of unemployment will inevitably result in higher wage growth over the medium term and this is likely to feed back into core inflation. Quarterly Economic Commentary – Spring 2023 | 57 As with most Western economies, the inflation outlook for the domestic economy is now set to be somewhat more benign than was initially thought at the end of 2022. In a Box to the present Commentary Disch and McQuinn examine an alternative approach to estimating the annual rate of inflation. This approach, which attributes greater weighting to more recent monthly estimates of inflation, indicates that the present annual rate may be somewhat below that of the official estimate. Our overall forecast for inflation in 2023 indicates that the annual rate for the year is now set to be 4.5 per cent before falling again in 2024 to 3.5 per cent. A crucial issue for the domestic economy over the next 12 to 18 months is that while external sources of inflation such as energy are likely to ease, domestic sources may well intensify as the economy continues to grow in a robust manner. In a Box to the Commentary Doorley, Duggan and Keane assess the distributional implications of the cost-of-living measures introduced by the Government in February 2023. They contend that the measures benefit low-income households relatively more than high income households. However, they argue that any future measures should be targeted in nature to avoid generating additional inflationary pressures in the economy. Doorley, Duggan and Keane also call for the core rates of social welfare payments to be re-examined in future budgets as they have not been increasing in line with inflation in recent years. The sustainability of MNE activity and corporation taxes In the previous Commentary Disch, McQuinn and O’Toole published a Box which highlighted the substantial difference in productivity levels between the Irish ICT sector and that of all other European Union countries. In this Commentary the same authors examine the sectoral distribution of corporation tax receipts to assess the concentration or otherwise of this substantial revenue stream for the Exchequer. The Box highlights the contribution of the major NACE sectors to corporation receipts and highlights the significant contribution of both the ICT and pharma sectors. This reinforces the idea that a major correction in either sector would not just adversely impact headline economic indicators such as value added and employment, but would also have substantial repercussions for the public finances. Overheating in the domestic economy and the housing market From a macroeconomic perspective, as the Irish economy emerges relatively unscathed from recent challenges such as COVID-19 and inflationary pressures, there is a significant risk that the country may face overheating challenges particularly in the face of a historically tight labour market. In such a context, it may 58 | Quarterly Economic Commentary – Spring 2023 be appropriate to deploy fiscal measures to decelerate the growth path and temper inflation. From a competitiveness perspective, any such increases in taxation may be better deployed on unproductive forms of economic activity, such as land, and not on labour or capital. Furthermore, in the context of broadening the tax base, the proposal by the Commission for Taxation for a site value tax (SVT) is of particular note. 14 The general case for such a tax has been made in Kumhof et al. (2021). 15 They argue that tax reform in general should shift taxes away from productive labour and capital, where they reduce incentives to work and save, and onto land, where they do not distort any such incentives. In an international context such a policy, Kumhof et al. (2021) and Wolf (2023) 16 argue, would provide sustainable Government revenue over the medium term while not adversely impacting overall economic activity. One area where the domestic economy is likely to face continued pressure over the medium term is in the housing market. The impact of high housing costs in an Irish context has been documented in Corrigan et al. (2019). 17 Housing supply levels reached a 15 year high in 2022 of 29,000 units. While the number of units supplied in 2023 is likely to be less than this owing to the reduced number of commencements in 2022, the underlying trend is an upward one as far as completions is concerned. However, in light of new population estimates which will be available in Q3 2023, it is now likely that the structural demand for housing will be revised upwards. This means that the demand for housing is likely to exceed the supply over the medium term. As a result, house price inflation and increases in rents are likely to continue, albeit, in the case of house prices, at a slower pace than was the case in 2022. The Government has committed to increase the funding available for housing construction generally; a necessary measure owing to the funding gap in the housing market identified for example by Duffy et al. (2016). 18 However, it is important that every effort is still made to reduce the cost of building a house and avoid adding to inflationary pressures in the housing market. 14 See Commission on taxation and welfare secretariat (2022). Proposed site value tax. Progress paper. 15 Kumhof M., N. Tideman, M. Hudson and C. Goodhart (2022). Post-Corona balanced fiscal stimulus: The case for shifting taxes onto land. CEPR discussion paper no. 16652. 16 Wolf M. (2023). ‘The case for a land value tax is overwhelming’. Financial Times 5 February. Available online at: https://www.ft.com/content/fadfbd9e-29ca-4d53-b69a-2497cc3ed95d. 17 Corrigan E., D. Foley, K. McQuinn, C. O’Toole and R. Slaymaker (2019). ‘Exploring affordability in the Irish housing market’, The Economic and Social Review, Vol. 50, pp. 119-157, No 1, Spring. 18 Duffy D., D. Foley, N. McInerney and K. McQuinn (2016). ‘Demographic change, long-run housing demand and the related challenges for the Irish banking sector’, in Ireland’s Economic Outlook. The Economic and Social Research Institute, December. Quarterly Economic Commentary – Spring 2023 | 59 Climate change policies and recent developments The war in Ukraine and the subsequent disruptions to global energy markets has had significant implications for the implementation of climate change policies. In a recent contribution, Lonergan and Sawers (2022) 19 and Wren-Lewis (2023) 20 argue that the increase in relative competitiveness of certain types of green power such as solar energy vis-à-vis traditional fossil fuels, means that policymakers should increasingly incentivise the provision of such green industries through subsidies and public investment as a means of achieving climate change targets. The Inflation Reduction Act (IRA) bill in the United States, which contains many such incentives, is offered as an example. This policy offers a number of initiatives to promote greener industries. The overall cost of promoting such a package is now relatively cheaper because the green sources of energy which it encourages have now become relatively cheaper, owing in no small way to the war in Ukraine. Social infrastructure: Hospital bed capacity Further challenges for fiscal policy are implicit in a Research Note to the Commentary by Walsh and Brick (2023) 21 which outlines projected public acute hospital bed requirements in Ireland for 2023. Based on previous work by the ESRI, the Department of Health’s Health Service Capacity Review and the National Development Plan, they estimate that in 2023 there may be a bed capacity deficit of approximately 1,000 inpatient beds in public acute hospitals. Walsh and Brick (2023) argue that this deficit is a key contributor to recent overcrowding issues. The Note acknowledges that the implementation of Slaintecare and the move towards community and lower care settings would ease the situation. However in the medium term, additional Government investment in the acute hospital system is required to meet both unscheduled care demand and to alleviate hospital waiting lists. 19 Lonergan E. and C. Sawers. Supercharge me, net zero faster. Columbia University Press. 20 Wren-Lewis S. (2023). ‘The political economy and worldwide implications of the Inflation Reduction Act in the US’. Blog post available online at: https://mainlymacro.blogspot.com/2023/02/the-political-economy-and-worldwide.html. 21 Walsh B. and A. Brick (2023). ‘Inpatient bed capacity requirements in Ireland in 2023: Evidence on the public acute hospital system’. Research Note, Quarterly Economic Commentary, Spring. Quarterly Economic Commentary – Spring 2023 | 61 Research Note Quarterly Economic Commentary – Spring 2023 | 63 INPATIENT BED CAPACITY REQUIREMENTS IN IRELAND IN 2023: EVIDENCE ON THE PUBLIC ACUTE HOSPITAL SYSTEM Brendan Walsh* and Aoife Brick 22 ABSTRACT In this Note, we provide estimates of public acute hospital inpatient bed requirements in Ireland in 2023, based on earlier ESRI research published by Keegan et al. (2018), the Department of Health’s Health Service Capacity Review (2018) and the National Development Plan (2018-2027). Each of these analyses projected hospital bed capacity requirements in Ireland based on a variety of projection scenarios. The Note finds that while absolute, and per capita, public acute hospital inpatient bed capacity has increased in recent years, large bed capacity deficits remain. Focusing on scenarios that assume an 85 per cent occupancy rate, we estimate that in 2023 there may be a bed capacity deficit of approximately 1,000 inpatient beds in public acute hospitals. This bed capacity deficit is likely a key contributor to recent overcrowding issues experienced in public acute hospitals. In addition to the deficit that currently exists in the system, over 300 additional inpatient beds are required per annum to keep up with demand pressures arising from an increasing and ageing population. 1. INTRODUCTION OECD and European Union statistics consistently find the public acute hospital system in Ireland to have amongst the lowest inpatient bed per capita rate compared to comparator countries (Walsh et al., 2020a; OECD and European Union, 2022). In 2019, Ireland reported the highest average occupancy rate, 90 per cent, in the OECD (OECD and European Union, 2022), which is much higher than the frequently referenced 85 per cent occupancy rate above which patient safety risk can arise (Bagust et al., 1999). In its recent Economic Survey of Ireland, the OECD included a detailed analysis of health sector performance and efficiency (OECD, 2022). This report further reiterated low levels of capital investment in health infrastructure and capacity constraints, including low numbers of hospital beds associated with inpatient bed occupancy rates above international safety standards. Winter 2022/2023 also saw severe overcrowding experienced by the public hospital system; on 3 January 2023, there were 749 people waiting on trolleys in public acute adult hospitals. 23 It has been acknowledged by the HSE that 22 Financial support for this work was provided by the Department of Health through the ESRI/Department of Health Research Programme in Healthcare Reform. The views expressed in this Note and Keegan et al. (2018) paper are those of the authors and not necessarily the Department of Health. 23 TrolleyGAR: http://137.191.241.85/ed/ED.php?EDDATE=03%2F01%2F2023. 64 | Quarterly Economic Commentary – Spring 2023 this overcrowding was caused in part by insufficient bed capacity in public acute hospitals, and may continue for a number of years as the ‘process to build beds is a long one’. 24 The objective of this Note is to provide estimates of projected public acute hospital inpatient bed requirements in Ireland in 2023, and the additional capacity needed in the coming years to meet demand. The estimates are based upon existing public acute hospital inpatient bed projections for Ireland from three published sources; the ESRI (Keegan et al., 2018), the Department of Health’s Health Service Capacity Review (2018) (PA Consulting, 2018), and the National Development Plan (2018- 2027). The analysis based on the existing evidence linearly projects bed requirements for 2023. The three publications on which these updated estimates are based are: • Keegan et al. (2018). How many beds? Capacity implications of hospital care demand projections in the Irish hospital system, 2015-2030. • PA Consulting (2018). Health Service Capacity Review (HSCR) 2018. The analyses in this review were compiled by PA Consulting on behalf of the Department of Health. • Government of Ireland (2018). National Development Plan (NDP) 2018- 2027. 2. PROJECTION SCENARIOS Each of the publications provided projections, rather than forecasts, based upon demand and capacity in a baseline year (varying from 2015-2018) and a range of underlying assumptions and scenarios outlined in Tables 1-3. The use of more recent base year data (e.g. 2022) may result in differing demand and capacity estimates. 2.1 ESRI projections (Keegan et al., 2018) This paper projected public acute hospital bed capacity requirements in Ireland from 2015-2030 based on the ESRI Hippocrates model. 25 Table 1 outlines the main assumptions made across the six scenarios included in the paper and projected inpatient bed requirements in 2030. Each scenario varies assumptions about 24 Comments from the interim HSE CEO to the Joint Committee on Health, January 17, 2023. https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_health/2023-01- 17/debate/mul@/main.pdf. 25 Financial support for the development of the Hippocrates model was provided by the Department of Health through the ESRI/Department of Health Research Programme in Healthcare Reform. Quarterly Economic Commentary – Spring 2023 | 65 population size, unmet demand (inpatient waiting lists), Healthy Ageing (this reflects the assumed changes in health and life expectancy), and efficiencies that could be made by reducing average length of stay (ALOS) and avoidable hospitalisations. Varying assumptions allow the wider possibility of needs to be accounted for, and provide controls for the inherent uncertainty in all projection exercises. TABLE 1 ESRI ‘HOW MANY BEDS?’ PROJECTION SCENARIOS AND ASSUMPTIONS Scenarios ASSUMPTIONS 2015 Baseline beds 2030 Projected bed requirements Population growth Healthy ageinga Unmet demand Public hospital inpatient occupancy rate Public hospital ALOS Avoidable hospitalisation rate reduction 1. Status Quo Central EM None No change No change No 10,363 14,797 2. Healthy Ageing Central DE None No change No change No 10,363 13,359 3. High Population growth High DE None No change No change No 10,363 13,917 4. (2) + addressing unmet demand Central DE Yes No change No change No 10,363 13,740 5. (4) + reducing bed occupancy Central DE Yes Converge to 85% by 2030 No change No 10,363 15,308 6. (5) + reducing ALOS + reducing avoidable hospitalisations Central DE Yes Converge to 85% by 2030 Reduce ALOS by 10% by 2030 33% reduction in avoidable hospitaisation rate by 2030 10,363 12,983 Source: Adapted from Keegan et al. (2018). Note: The ‘expansion of morbidity’ (EM) hypothesis assumes that additional life years gained are spent in bad health. The ‘dynamic equilibrium’ (DE) hypothesis posits that as life expectancy increases, all gains in life expectancy are spent in good health (or mild ill-health). 2.2 Health Service Capacity Review (2018) and NDP projections (2018-2027) Tables 2 and 3 outline the main assumptions made across all scenarios within the HSCR and NDP reports, to the best of the authors’ interpretation of the published reports. In Table 3, the Note assumes the base year (2018), and projections end year (2027) equate to the time-period of the NDP. 72 | Quarterly Economic Commentary – Spring 2023 optimistic projection scenarios listed in the HSCR and NDP may underestimate bed capacity needs, especially without substantial improvements in primary and community-based care, and patient flow into post-acute settings, occurring. Meanwhile additional bed capacity will also require sufficient workforce to provide care. To inform workforce planning, a recent ESRI analysis using the Hippocrates Model also projected the workforce requirements for public acute hospitals to 2035, at both a national and regional level (Keegan et al., 2022). This Note estimates that in 2023, based on ESRI projection Scenario 5 from Keegan et al. (2018), there may be a shortfall of over 900 beds in Irish public acute hospitals. This is despite the additional hospital bed capacity added in recent years. This shortfall increases the likelihood of overcrowding issues remaining a common feature of the Irish public acute hospital system in the short term. Examining average annual bed capacity requirements, ESRI projection Scenario 5 also estimates that an additional 330 inpatient beds may be required in the public acute hospital system, in addition to the over 900-bed shortfall that exists in 2023. Keegan et al. (2018) estimated a number of sensitivity analyses that examine the percentage change in projected bed capacity if key assumptions (e.g. population size, healthy ageing, inpatient bed occupancy, ALOS) were altered. Those analyses highlighted that assuming a higher occupancy rate, e.g. 90 per cent, would reduce estimated bed requirements. However, the evidence linking high occupancy rates to poor patient- and system-level outcomes means the benefits of using high occupancy to determine bed capacity requirements would ultimately result in insufficient supply and continued periods of overcrowding in the system. The Note finds that while inpatient beds per capita have increased, they remain amongst the lowest in the OECD. While the Note also finds that despite the population aged 65+ using more than half of all inpatient bed days, beds per 1,000 population aged 65+ have decreased considerably in recent years. A number of caveats should be remembered when interpreting analyses in this Note. First, including a more recent base year data (e.g. 2022) may result in differing demand profiles and therefore different bed capacity estimates. Second, the impact of COVID-19 on population health and hospital demand is not incorporated in the estimates for this Note as all projection analyses exercises preceded the pandemic. The lasting effects in terms of infection control measures, COVID-19 outbreaks in hospitals, and increases in public hospital waiting lists may mean the estimates in Figure 2 underestimate the bed capacity shortfall in 2023. Third, it was necessary to estimate 2022 and 2023 inpatient bed figures as at the time of writing no published data exist on current bed numbers. Up-to-date validated day patient and inpatient bed data from a single source would allow for Quarterly Economic Commentary – Spring 2023 | 73 an increased ability to examine hospital bed capacity requirements. Finally, while the analyses highlighted inpatient beds, it is important to understand that bed requirements must be considered in the context of infrastructure, workforce (clinical and non-clinical requirements; see Keegan et al., 2022), and overheads. 74 | Quarterly Economic Commentary – Spring 2023 REFERENCES Bagust, A., M. Place and J.W. Posnett (1999). ‘Dynamics of bed use in accommodating emergency admissions: stochastic simulation model’, BMJ 319(7203): 155-158. https://doi.org/10.1136/bmj.319.7203.155. Bosque-Mercader, L. and L. Siciliani (2022). ‘The association between bed occupancy rates and hospital quality in the English National Health Service’, The European Journal of Health Economics. 10.1007/s10198-022- 01464-8. Central Statistics Office (2022). Census of Population 2022 - Preliminary Results. https://www.cso.ie/en/releasesandpublications/ep/pcpr/censusofpopulation2022-preliminaryresults/. Department of Health (2022). Health in Ireland: Key Trends 2022. Department of Health, Dublin. https://assets.gov.ie/241598/8a6472b4-83cf-45ec-88c9- 023e0c321d8c.pdf. Government of Ireland (2018). Project Ireland 2040: National Development Plan 2018-2027, Dublin. https://www.gov.ie/pdf/37937. Health Service Executive (2022). Winter Plan October 2022 – March 2023. Health Service Executive, Dublin, https://www.hse.ie/eng/services/news/media/pressrel/winter-plan- 2022-23.pdf. Healthcare Pricing Office (2022). Activity in Acute Public Hospitals in Ireland Annual Report, 2021. Health Service Executive, Dublin, http://hpo.ie/latest_hipe_nprs_reports/HIPE_2021/2021_HIPE_Activity_ Report_v2022-12-21.pdf. Healy, M., H. Bruel, D. Doherty, C. Gibbons, E. Brereton, M.H. Tan, M. Lawlor, A. Geraghty, G. Nevin and C. McGarvey (2022). ‘Irish Paediatric Critical Care Audit National Report 2017-2019’. Keegan, A.D. (2010). ‘Hospital bed occupancy: more than queuing for a bed’, Med J Aust 193(5): 291-293, https://www.ncbi.nlm.nih.gov/pubmed/20819049. Keegan, C., A. Brick, G. Rodriguez and L. Hill (2022). Projections of workforce requirements for public acute hospitals in Ireland, 2019-2035: A regional analysis based on the Hippocrates model. ESRI Research Series 147. Economic and Social Research Institute. https://doi.org/10.26504/rs147. Keegan, C., A. Brick, B. Walsh, A. Bergin, J. Eighan and M. Wren (2018). ‘How many beds? Capacity implications of hospital care demand projections in the Irish hospital system, 2015-2030’, The International Journal of Health Planning and Management 34(1). https://doi.org/10.1002/hpm.2673. Madsen, F., S. Ladelund and A. Linneberg (2014). ‘High levels of bed occupancy associated with increased inpatient and thirty-day hospital mortality in Denmark’, Health Aff (Millwood) 33(7): 1236-1244. https://doi.org/10.1377/hlthaff.2013.1303. Quarterly Economic Commentary – Spring 2023 | 75 Morley, C., M. Unwin, G.M. Peterson, J. Stankovich and L. Kinsman (2018). ‘Emergency department crowding: a systematic review of causes, consequences and solutions’. PloS one 13(8): e0203316. OECD (2022). OECD Economic Surveys: Ireland 2022. OECD and European Union (2022). Health at a Glance: Europe 2022. PA Consulting (2018). Health Service Capacity Review 2018. Department of Health, Dublin. https://assets.gov.ie/10132/7c2a2299ca924852b3002e9700253bd9.pdf. Shine, C. and M. Hennessy (2022). Spending Review 2022 Health Capital Investment in Ireland. Turner, A.J., L. Anselmi, Y.S. Lau and M. Sutton (2020). ‘The effects of unexpected changes in demand on the performance of emergency departments, Health Economics 29(12): 1744-1763. Walsh, B., C. Keegan, A. Brick and S. Lyons (2020a). How is Ireland’s healthcare system coping with coronavirus? Retrieved 22 October, 2020, https://www.coronavirusandtheeconomy.com/question/how-irelands- healthcare-system-coping-coronavirus. Walsh, B., S. Lyons, S. Smith, M.A. Wren, J. Eighan and E. Morgenroth (2020b). ‘Does formal home care reduce inpatient length of stay?’, Health Econ. https://doi.org/10.1002/hec.4158. Wren, M.-A., C. Keegan, B. Walsh, A. Bergin, J. Eighan, A. Brick, S. Connolly, D. Watson and J. Banks (2017). Projections of Demand for Healthcare in Ireland, 2015-2030. First Report from the Hippocrates Model. ESRI Research Series 67. Economic and Social Research Institute, Dublin. https://doi.org/10.26504/rs67. Whitaker Square, Sir John Rogerson’s Quay, Dublin 2 Telephone +353 1 863 2000 Email [email protected] Web www.esri.ie Twitter @ESRIDublin