Strong domestic sources of growth, along with improving international conditions, led to an expected growth rate of 4.8% in 2018. The ESRI also expects that these components will result in growth of approximately 3.9% in 2019, assuming that a European Economic Agreement (EEA) will exist between the UK and the EU.
The ongoing uncertainty concerning the UK Government’s stance on remaining in the EU Single Market and Customs Union is of particular relevance to the Irish economy. The ESRI estimates that the imposition of tariffs could increase the annual cost for the average household between €892 (increase in non-tariff trade costs) and €1,360 (tariffs plus other trade cost increases). Along with the estimated impact of a hard Brexit on Irish fiscal space, this represents another tangible example of how a hard Brexit would impact the domestic economy.
Forecasts for the international economy have been recently revised upwards in light of robust, well-distributed global growth. Contributing factors towards this improved outlook include the strong performance among major nations such as Germany, Spain, Canada and China. This, coupled with newly passed US tax policy adjustments, has resulted in IMF projections for global growth in 2017 rising by 0.1 percentage points to 3.7%. Global growth is expected to accelerate to 3.9% in 2018 and 2019. The Eurozone maintains its improving performance as record-low interest rates look likely to be maintained in the short run.
Gross Domestic Product in the UK is estimated by the Office of National Statistics (ONS) to have increased by 1.7% in 2017 compared with growth of 1.9% in 2016. Since the Brexit referendum in Q2 2016, the Sterling to Euro exchange rate has depreciated by 12.8%, while there have been substantial levels of volatility in net investment; an immediate net outflow of funds in 2016 was followed by a significant inflow in 2017.
Click here to read the full ESRI report.
Bank of Ireland Economic Pulse March 2018
The Bank of Ireland Economic Pulse stood at 97.2 in March 2018. The index, which combines the results of the Consumer and Business Pulses, was up 1.9 on February and 6.0 higher than a year ago when the UK triggered Article 50. The Business Pulse led the way this month, though sentiment was mixed across the sectors. The recent bad weather impacted construction activity in particular, while Brexit was on everyone’s radar amid tensions over the terms of the transition period. On the consumer front, confidence was down a little in March but remains at a high level.
The Business Pulse rose for a third month running in March 2018, to 96.9 (this was a 21-month high, 2.7 higher than last month and 6.1 higher than a year ago). Sentiment was mixed across the sectors though, with the Services and Retail Pulses gaining ground but the Industry and Construction Pulses down. The March data also show that almost two in five businesses expect to spend more on investment this year compared to last year, with demand from customers, financial and technical conditions generally seen as supportive. While the UK vote to leave the EU remains a drag, the number of firms impacted by this decision and putting their investment plans on hold because of it is now at 44%, down from 53% this time last year.
The BOI Economic Pulse for March 2018 can be accessed here.