Irish economy performing well but Brexit uncertainty remains, commission warns



Patrick Smyth | The Irish Times

Prospect of a significant fallout from the Coronavirus on the whole European economy is also likely, Paolo Gentiloni, economic affairs commissioner, warned.

A “marked rebound” in Irish consumer and business confidence after the threat of a no-deal Brexit receded is supporting a more optimistic outlook for the economy, the European Commission’s latest economic forecasts has predicted.

But there is considerable uncertainty about “the possibility of an abrupt change in trading relations” between the EU and UK beyond the end of the year, the report warns.

The commission expects Ireland’s GDP will grow by 3.6 per cent this year and by 3.2 per cent in 2021, having risen by an estimated 5.7 per cent last year. Only two countries are forecast to see faster growth in 2020: Malta at 4 per cent and and Romania at 3.8 per cent.

On average, GDP is expected to grow by 1.4 per cent in the EU and by 1.2 per cent in the euro area in 2020 and 2021. The forecasts were published in Brussels on Thursday.

Growth in the euro area “turned out better than expected in the third quarter but disappointed at the end of the year”, the commission said. Leading indicators suggest that manufacturing output may stabilize in the months to come, although an upturn is not yet on the cards, the report says.

“However, with hints of a bottoming out in global trade flows, and as the dampening impact of domestic inventory adjustment fades, a trough may have been reached.”

The prospect of a significant economic fallout from the Coronavirus epidemic on the whole European economy is also likely, Paolo Gentiloni, economic affairs commissioner, warned. The scale of such a downside to prospects, depends entirely, however, on the extent and duration of the epidemic and is not at this stage quantifiable, he said.

Since the Sars epidemic the Chinese economy’s share of the world economy had grown from 4.5 per cent to 17.5 per cent, he said, evidence of the potential impact likely, particularly on manufacturing and global supply chains. China now also represented 18 per cent of global travel expenditure.

In Ireland, real GDP grew at the brisk pace of 5.9 per cent year-on-year over the first three quarters of 2019, driven by strong private consumption, exports and investment. The report says that “the rise in the national minimum wage on February 1st should support the disposable income of poorer households”.


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