business planning seminar
TRANSCRIPT
Business Planning in 2009
The Macroeconomic Environment
Seamus Coffey, Dept of Economics, UCC
Are we all out of luck?
Then and Now
Unemployment Rate (March): 1984: 15.2%2009: 11.0%
Inflation (March Annual Rate): 1984: 10.1%2009: – 2.6%
Interest Rate: 1984: 12.00% (Central Bank Rediscount Rate)2009: 1.25% (ECB Main Refinancing Rate)
Exchequer Balance (%GDP):1984: 10.50%2009: 10.75%
The Unemployment Rate
Inflation-5
05
10
15
20
25
inflat
1980 1990 2000 2010date
Monthly Annual Inflation Rate
Per Capita GDP0
10000
20000
30000
40000
GD
P P
er
Capita in 2
000 N
CU
s
1970 1980 1990 2000 2010Year
Real GDP Per Capita
Government Balance
The Public Finances
The God That Failed
2007 2008 2009 E
Value Added Tax
Income Tax
Excise
Stamps
Corporation Tax
Capital Gains Tax
Customs
Training & Employment Levy
Unallocated
14,496,588
13,572,410
5,837,878
3,185,602
6,390,625
3,105,495
265,904
2,501
0
13,429,602
13,176,857
5,443,338
1,650,792
5,065,894
1,430,080
248,001
1,032
0
11,420,000
12,475,000
4,634,000
980,000
3,740,000
625,000
230,000
1,000
0
Total 47,249,352 40,777,196 34,400,000
Tax Revenue (€000s)
Tax Revenue has dropped 30% in just two years.
Expenditure (€000s)
Vote or Group of Votes 2007 2008 2009E
Health & Children 12,448,835 13,745,317 13,426,037
Social & Family Affairs 8,180,934 9,399,098 10,915,679
Education & Science 8,443,974 9,031,516 8,900,030
Other 15,534,992 17,136,863 14,162,658
Total 44,608,735 49,312,794 47,404,404
Even with the announced expenditure “cuts” we are still spending more than we did two years ago.
Further labour market deterioration is likely to increase social welfare spending (and reduce tax revenue)
Closing the Gap
More Taxes Less Spending
Or just hope for the best!
Market Response – Worry!
Household Response – Save!
010
000
2000
030
000
4000
0sa
ving
s
2006:Jul 2007:Jan 2007:Jul 2008:Jan 2008:Jul 2009:Jandate
Household Savings in Accounts of 2 Years or less
International Government Responses – Spend!
Millions, Billions and Trillions
The recent G20 meeting in London formalised a collective “stimulus” package of $5.5 trillion from members.
The “bailout” of financial markets could run to $3.5 trillion.
• Where will this money come from?• What will it do?• Where will it go?
“A billion here and a billion there and pretty soon you’re talking about real money!”
Everett Dirkson, US Senator
Me and a Million!
Me and a Trillion!