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Economic activity in Ireland is projected to remain robust, but to ease gradually. Abstracting from volatile activities of multinational enterprises (MNEs), underlying domestic demand will remain strong, underpinned by solid employment growth and consumption. As the economy approaches full employment, job growth will moderate while wage pressures will be significant, feeding into higher inflation. Property prices will remain very high, spurring strong construction investment.
The fiscal position will not improve much over the next two years. The government should remain committed to improving the fiscal position, but be ready to ease the fiscal stance to mitigate the impact of a potentially disorderly conclusion to Brexit negotiations. Ireland would be one of the most negatively impacted EU countries of such an outcome. The implementation of a new development plan aimed at economic, environmental and social progress should be conditional on improving the fiscal position, and the authorities should ensure that the associated projects are carefully prioritised.
1. Real wages are nominal wages adjusted for headline inflation.
2. 4-quarter average of gross new lending by banks to Irish resident SMEs.
Source: OECD Economic Outlook 104 database; and Central Bank of Ireland.
Economic Survey of Ireland (survey page)