The European Commission has revised its growth predictions for Ireland this year and next year, revising upwards its predictions in its Autumn 2018 Economic Forecast.
The economy is forecast to expand by 7.8% this year but growth should moderate to 4.5% in 2019 and 3.8% in 2020, as a strong labour market and investment are supporting domestic growth.
The Commission had previously issued a growth forecast of 5.6% this year and 4% next year.
‘GDP growth in Ireland is expected to be strong this year, driven largely by the activities of multinational companies, but the pace is projected to moderate,’ the report said.
‘The positive performance of the labour market and construction investment are expected to support the domestic economy in the near term. The government deficit is projected to turn slowly into a surplus, but risks to the fiscal outlook remain.’
Employment, in particular, full-time employment, increased strongly in the first half of 2018, as the unemployment rate stood at 5.4% in September. The Commission expects this to fall below 5% in 2020.
As a result of the robust job creation, household earnings has increased, but the tightening of the labour market is expected to put upward pressure on wages and household disposable income.
Total exports increased by 8.7% compared to last year, driven largely by trade in pharmaceutical goods while exports of services grew only modestly.
Over the same period, total imports declined by 3.7%, mainly due to a strong fall in imports of services related to research and development by multinationals. By contrast, imports of goods increased by 7.2%.
Net exports are expected to contribute considerably to GDP growth in 2018. In 2019 and 2020, net exports are expected to contribute positively to GDP growth, although significantly less than in 2018.
However, headline trade figures will likely continue to be influenced by the activities of multinationals.
© 2018 Checkout – your source for the latest Irish retail news. Article by Aidan O’Sullivan. Click subscribe to sign up for the Checkout print edition.