The Central Bank of Ireland (CBI) has revised upwards its growth forecasts for the Irish economy in 2018 and 2019.
The economy is forecast to grow 4.8% for this year and 4.2% through 2019, up 0.4% and 0.3% respectively from the previous forecast.
Unemployment is projected to average 5.6% in 2018 and 4.8% in 2019 and an additional 99,000 persons forecast to be in work by the end of 2019. CBI is also projecting headline inflation, projected of 0.8% in 2018 and 0.9% in 2019.
On pay, the CBI is predicting a sharp rise in wages, with employee compensation increasing by 3.3% on average in both 2018 and 2019. This follows an estimated increase of 3.0% in 2017, according to CBI.
The CBI’s view on wage trends is at odds with the latest Earnings and Labour Costs Quarterly research issued by the Central Statistics Office in February 2018.
In Association with
This showed that in the year to Q3 2017, annual hourly earnings pay inflation was:
• Overall 2.3%
• Private Sector 2.1%
• Public Sector 2.6%
• Less than 50 employees 1.9%
• 50-250 employees 2.0%
• Greater than 250 employees 1.8%
Mark Cassidy, Director of Economics and Statistics, said: “The Irish economy continues to perform well, buoyed by domestic activity and international economic growth. Our forecasts for further growth in earnings this year and next, combined with expectations of modest inflation, means rising wages should translate in to higher real incomes and greater purchasing power for households.”
The CBI’s Q2 Economic Bulletin also outlines a number of risks to the projected growth of the Irish economy, including uncertainty around the implications of US tax reform, possible changes to the taxation of digital services and the risk of protectionist international trading measures.
On Brexit, the CBI muses that if there is a substantial shift in the regime governing UK-EU trade, there will be a costly diversion of resources to logistics and trade-processing systems. “Should extra transit time and additional administrative burdens increase the costs of importing and exporting, both Irish consumers and exporters will be negatively impacted,” Cassidy stated.
“Domestic demand and positive global economic conditions have seen Ireland absorb the impact of Brexit with relatively little pain to date. However, any obstacles to the way the UK currently trades with the EU is likely to generate a reduction in long-term living standards in Ireland, reduce the range of imported goods available to Irish consumers and make it more difficult for domestic firms to export their goods.”
