The Central Bank says that the economy’s strong performance in 2018 will not carry through into this year, with economic growth now expected to be 4.2% in 2019 and falling to 3.6% in 2020.

A ‘disorderly’ Brexit would reduce those figures further, says the bank’s Quarterly Bulletin, even though the outlook for growth would remain positive. Nonetheless, in line with this the bank says that the unemployment rate will fall further to 5.4% this year and 5% in 2020.

Economics director Mark Cassidy said: “Our analysis suggests that a disorderly, no-deal Brexit could reduce the growth rate of the Irish economy by around four percentage points in the first year and by a further two percentage points in the second year. 

“This would imply that while there would still be positive growth this year and next, it would be materially lower than in the central forecasts – with growth expected between 1.0 and 1.5% in 2019 and 2020 in a no-deal Brexit scenario.”

Migration Impact On Wages

Interestingly, the bulletin includes an explanation for the sluggishness with which wages and salaries have increased during the recovery. That is the return to net inward migration since 2016, averaging 23,300 each year since then.

In Association with

Between 2008 and 2015, 113,000 Irish nationals left the country and 2018 was the first year in which the number of returning Irish migrants exceeded the number leaving the country. 

The CBI attributes this to the slow advance of salary levels in Ireland, as evidence from previous experience of returning emigrants shows that they are attracted home by a wage premium. 

While the level of Irish employment has grown steadily in recent years, non-Irish employment has increased much more quickly. The average annual growth rate of non-Irish employment since 2015 is 7%, while the figure for Irish employment is 3%. 

The view from the Central Bank is that the effect of the inward migration is essentially to alleviate shortages in the tightest sectors of the labour market. For example, in the ICT sector almost half of the new hires last year were migrants, 40% of whom arrived in Ireland within the last year. 

On the other hand, the CBI notes that the construction sector, which imported thousands of workers during the Celtic Tiger years, now hires predominantly from the domestically available stock of labour. In 2018, just 3% of new hires in construction were recent migrants. 

The bulletin concludes: “While significant variation exists across sectors, the importance of migration in the labour market has risen considerably since 2015. Given the outlook for employment growth, inward migration will continue to be an important source of additional labour supply in a tightening labour market.”