THE Central Bank has laid out a rosy economic forecast, with continued growth and tens of thousands more people in work over the next three years.
However, it warned that a hard Brexit would damage the country – and even a soft Brexit would slow growth substantially for an economy that is more exposed to Britain than any other.
The bank said a no-deal Brexit would potentially reduce growth by 2.75pc after five years and reduce by 40,000 the number of new jobs that could be created compared with a scenario where Britain stayed in the EU. Even a “soft Brexit” would knock 1.7pc off growth.
The bank’s central forecasts upgraded this year’s growth forecast to 7.2pc and 2018 to 6.7pc, while its initial estimates for 2019 and 2020 see growth tapering to 3.7pc in the final year. Successive years of economic growth will push the unemployment rate down to 4.7pc and should boost wage growth, it said.
The numbers reflect a Brexit deal being struck and the trading relationship with Britain remaining unchanged as a result through the forecast period to 2020.
“If the worst case scenario was to evolve then you would expect significant downward revisions to the 2019 and 2020 figures,” Mark Cassidy, the bank’s head of economics and statistics, said yesterday.
The bank’s forecasts -ex-Brexit – were broadly in line with those given by Finance Minister Paschal Donohoe in this week’s Budget, although it said it had advised the Government to move faster to a budget surplus to alleviate the risk of overheating.
Mr Donohoe has said he would run a balanced budget from 2019 after a small deficit in 2018 in fiscal plans that were widely seen as paving the way for an election.
With monetary policy set in Frankfurt for the whole eurozone, Ireland has few options apart from the budget to rein in economic overheating.
The Central Bank has already put in place measures to curb the property market. Yesterday Mr Donohoe told Independent News & Media’s 2019 Budget Breakfast that his decision to raise Vat on the tourism sector showed he was not afraid of making difficult decisions.
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