Irish economy continues strong performance as first forecasts for 2019 published

• GDP projection revised up to 4.4% for 2018, moderating to 3.9% in 2019
• Underlying domestic demand also continuing to increase, supported by growth in employment and incomes
• Risks remain, including Brexit, global trade and taxation environment and domestic overheating

The Central Bank of Ireland has today published its first Quarterly Bulletin of 2018 which presents, for the first time, economic forecasts for 2019. The Bulletin examines recent trends in the domestic economy and provides the Central Bank’s forecasts for the Irish economy and its views on domestic macro-economic policy issues.

The Bulletin reports:

• The Irish economy continues to perform strongly, with growth in GDP for 2018 revised upwards to 4.4%, with demand from our main trading partners expected to be somewhat stronger in 2018 than was expected at the time of the previous forecast
• A slight moderation in GDP growth at 3.9% in 2019 is expected as the economy gets closer to full employment and growth in our trading partners moderates
• Employment is expected to grow by 2.2% in 2018 and 1.8% in 2019. This would see an additional 89,000 people in work and overall employment levels at 2.3 million, in excess of the pre-crisis (2007) peak level. However, the make-up of employment is likely to be significantly different by 2019 with approximately 1 in 16 persons (directly) employed in construction compared to 1 in 9 back in 2007
• A gradual pick-up in headline inflation to 0.7% in 2018 and 0.9% in 2019 is forecast as the recent negative impact on goods prices, driven largely by the fall in sterling and cheaper imports, moderates. Meanwhile, prices for services are expected to increase.

Mark Cassidy, the Central Bank’s new Director of Economics and Statistics, said: “The outlook for Ireland’s economy is largely positive, driven by broad-based growth in employment, which has boosted incomes and consumer spending.

“Crucially, our outlook brings the prospect of full employment into view as the unemployment rate is projected to fall to just over 5% next year. Average earnings are also expected to increase, by 3.2% this year and 3.4% next year.

“However, we cannot afford to be complacent as the economic growth we are projecting will not necessarily be plain sailing and is faced by real and varied risks. The small and open nature of our economy leaves us particularly vulnerable to the present uncertainty in the global taxation environment. Brexit continues to be the big unknown in terms of future trading conditions with the UK, a vital economic partner. And with such solid growth, the risk of economic overheating – or boom and bust economic cycles – means that we continue to urge prudence in public spending in support of stable growth.”