Ireland’s economy is forecast to grow by 2.7% per annum over the next four years. Employment will also continue to rise, however, the island’s resilience is likely to be tested moving into an uncertain 2017.
This is according to the latest EY Economic Eye Winter Forecast published today. The report found that despite the seismic shift in the global economic and political movements, Ireland’s economy will continue to prosper with 3.1% growth expected in 2016, 2.9% in 2017, and an average growth rate of 2.7% between 2016-2020.
According to Economic Eye, the pace of jobs growth over 2016-2020 will be slower in the Republic of Ireland than in the 2012-2015 recovery phase. However, it will continue to grow and will close in on surpassing the previous peak employment levels witnessed in 2007. Ireland’s employment will also outperform Northern Ireland and the UK, with NI set to lose employees in the short term.
The civil service in the Republic of Ireland is expected to maintain its current size. While health and education employment is projected to add over 14,000 jobs, as Government spending growth averages 2.3% over 2016-2020, reflecting Ireland’s post-austerity public finances.
Furthermore, following its gradual emergence from a very challenging economic downturn, the retail sector is expected to gather significant pace, with an additional 24,000 jobs forecast driven by consumer spending – having recorded less than half of this (11,500) in Ireland’s first recovery phase – while the construction sector will grow by 20,700 jobs.
Meanwhile, the information and communications sector is expected to gain a further 10,700 jobs while growth slows in Northern Ireland.
However, not all sectors are predicted to perform as well post-Brexit, with the report finding that the investment and export-orientated sectors will face the largest downside risks to their prospects.
Agriculture is projected to lose 10,500 jobs by 2020, having gained close to 30,000 on an all-island basis since 2012. Factors driving this forecast include increased costs and the burden of trading cross jurisdiction, as well as continued currency volatility. However, businesses are already actively thinking about identifying new markets and creating efficiencies where possible to deal with these challenges.
While the UK’s recent decision to leave the EU has resulted in a weakened Sterling and a shifting in trade patterns and consumer behaviours in both Northern Ireland and the Republic of Ireland, EY Economic Eye forecasts that between now and the end of the decade, growth in consumer spending is expected to average 2.7% per annum, almost 1.5 percentage points faster than NI. This, coupled with low inflation, more people in employment and growth in disposable incomes of 3% per annum will combine to propel growth.
Commenting on the report, Economic Advisor to EY Economic Eye, Neil Gibson said,
“The variety of jobs created recently in Ireland is welcome and is helping to drive down unemployment through the regions. But clearly the potential implications of tariffs and the shifts in the exchange rate, impact more severely on certain sectors than others. Though the outlook is for Ireland to create more jobs, much depends on the detail of the exit deal.
The 2016 data tells us clearly that firms, though they may be worried, will continue to go about their business until such time as the trading conditions change. This means the island economy enters 2017 in a fairly robust state, but with volatility and the spectre of inflation in the UK on the horizon, the New Year is projected to be tougher going.”