The Irish economy continues to grow, driven by strong domestic demand. Improving household balance sheets and falling unemployment are expected to support solid consumption growth over the forecast horizon. The expansion in underlying investment activity, particularly construction, looks set to continue into 2017 and 2018, according to a variety of indicators.
The Irish labour market continues to exhibit strong growth into 2017. The improvements in the labour market appear to be quite broad, both regionally and by sector, with almost all sectors registering employment growth. The unemployment rate is forecast to average 5.4 per cent in 2018. This tightening of the labour market and positive projections for inflation should also support moderate rises on wages over the period.
Brexit continues to pose a substantial risk for the Irish economy. New calculations presented in the QEC suggests that a hard Brexit could have significant implications for the fiscal space available in the budgetary process. This comes at a time when taxation revenue growth in 2017 has slowed down considerably as income, corporation and excise duties all took in less revenue than expected. Consequently, the QEC authors increased the forecast for the likely Government deficit in 2017.
Author Kieran McQuinn commented, “2017 has seen certain countervailing trends emerge in relation to the overall positive performance of the Irish economy. On the positive side, labour market data illustrates that the pace of employment creation and subsequent reduction in unemployment increased in 2017.”
Fellow co-author Dr Conor O’Toole said, “Less encouragingly, the state of the public finances and the performance of different taxation headings in particular have been significantly less robust in the present year. Apart from VAT receipts, most other tax headings either display weak growth or declines with respect to the same time last year.”
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