The latest Quarterly Economic Observer (QEO) by the Nevin Economic Research Institute (NERI) predicts real Irish GDP growth of 4.1% this year and 3.7% next year.
NERI claim the labour market should continue to strengthen with employment growth of 2.6% in 2016 and moderating but still healthy employment growth in 2017. The unemployment rate should be below 7% by the end of 2018 they claim.
The Institute believes the deficit in the public finances should improve to around 0.5% of GDP in 2017 assuming full use of the available fiscal space. They project a modest surplus in 2018.
Furthermore, NERI believes the Brexit remains a major downside risk. Their forecast is for a negotiated settlement that minimises change to the UK/EU trading relationship and a more significant change will impact negatively.
Other risks to the forecast include rising energy prices, weaker than expected productivity growth and greater than assumed damage to the labour force arising from the recession and prolonged stagnation.
The Quarterly Economic Observer—published on Tuesday 27th September— notes that the available fiscal space will be very tight for the next two years. Existing and future spending pressures mean that the case for cutting taxes in Budget 2017 is very weak.
Speaking in advance of the report’s launch, Senior Economist, Dr Tom McDonnell noted, "Existing and future spending pressures mean that the case for cutting taxes in Budget 2017 is very weak. Instead the budget should focus on measures to boost productivity and labour force participation. This means prioritising spending on infrastructure, education, R&D and childcare."
Source: www.businessworld.ie