ECONOMY
GLOBAL ECONOMY
NATIONAL ECONOMY
2018 began with positive growth expectations across the globe, but with growing uncertainty surrounding geopolitics, trade and Brexit outcomes, a more cautious tone has emerged towards the end of the year. The IMF’s latest global forecasts indicate that the expansion identified in previous months may now have peaked, with high levels of uncertainty weighing on overall global growth. Projected economic growth is steady, though less optimistic, at 3.7% for both 2018 and 2019. US growth remains unchanged at 2.9% for 2018 after a strong two quarters of data, and a sizeable fiscal stimulus. Forecasts have however been revised down to 2.5% in 2019 as the consequences of trade tariffs are expected to impact. The US is expected to grow beyond its potential to 2020, but is expected to dip thereafter as monetary policy tightens.
Strong Irish GDP growth is continuing into 2018, reaching 9.0% in the year to Q2, following 7.2% annual growth in 2017. However, there are reservations about the use of GDP as a measure of economic activity. Modified Domestic Modified Domestic Demand (MDD), which removes the effects of aircraft leasing and the import of intellectual property, shows that the economy grew by 4.2% in the year to Q2. GNP increased at a rate of 11.9% in the same period. Personal consumption increased by 4.4% in the year to Q2, driven by jobs growth, while capital investment declined by 32% due to a large decrease in intangible assets. 74,700 new jobs were added on a seasonally adjusted basis (+3.4%) in the year to Q2, while unemployment decreased from 6.6% to 5.4% from August 2017 to 2018. Job growth has been broadly-based, showing growth in 10 of 14 sectors, with construction and retail performing particularly well. The sectoral spread is notably different to the 2007 peak, with construction significantly lower, although now picking up pace. Labour force participation rates have been slower to rise (currently at 62.3%). With 243,000 new jobs forecast over the next 5 years and full employment looming, migration will be required to fill this gap.
world growth rates, 2018 6 5 4
job growth by sector (index 2007 q2 = 100)
3
130 2 %
120
1
110
0
100 90
-1
80 -2
Indonesia
Global
Ireland
Turkey
US
Australia
Spain
Korea
major economies gdp growth forecasts 2017 %
2018 %f
2019 %f
3.7
3.7
3.7
uk
1.7
1.4
1.5
us
2.2
2.9
2.5
euro area
2.4
2.0
1.9
germany
2.5
1.9
1.9
japan
1.7
1.1
0.9
china
6.9
6.6
6.2
india
6.7
7.3
7.4
Agriculture
Construction
Q2 18
Q4 17
Q2 17
Q4 16
Q2 16
Q4 15
Q2 15
Q4 14
Q2 14
Q4 13
Q2 13
Q4 12
Q2 12
Q4 11
Q2 11
Q4 10
Q2 10
Q4 09
Q2 09
Q4 08
Q2 08
Q4 07
30
The IMF has lowered its Euro Area forecasts on the back of weaker than expected data for the first two quarters of the year, showing a loss of momentum in exports. 2018 is expected to see growth of 2.0%, slowing to 1.9% in 2019. It cited the threat of contagion from volatile emerging market economies as a factor for this. UK forecasts have also been lowered in recent months. An uncertain lead up to March 2019 is hampering business and investment decisions. A weaker Sterling has been boosting exports, but increasing inflation for consumers and businesses. Annual pay growth of 2.7% means that consumers are barely keeping up with inflation (2.4%). UK GDP is forecast at 1.4% for 2018 and 1.5% for 2019.
source: imf weo forecasts, october 2018.
50 40
source: imf weo forecasts, october 2018. note: ey-dkm 2018 growth forecast for ireland 8.2%
global
60
Q2 07
Mexico
S. Arabia
Canada
Russia
Germany
France
UK
Brazil
Italy
Japan
S. Africa
70 Argentina
-3
Services All NACE economic sectors
Industry
source: central statistics office. note: seasonally adjusted
Brexit talks now appear closer to a breakthrough with Westminster and Brussels in deep discussions to resolve the issues surround the Irish Border. EU leaders have backed May to build a ‘coalition of the reasonable’ in parliament to help avoid a no-deal. Although, the admission that the UK could stay a year longer in a transition period has angered her Conservative backbenchers.
irish macroeconomic growth forecasts
gnp gdp MDD private consumption public expenditure investment exports imports unemployment rate employment cpi inflation
2017 %
2018 %f
2019 %f
4.4% 7.2% 3.2% 1.6% 3.9% -31.0% 7.8% -9.4%
9.0% 8.2% 3.8% 3.2% 3.8% -2.9% 7.1% 1.0%
4.2% 4.4% 4.0% 2.9% 3.3% 7.0% 5.9% 6.1%
6.7% 2.9% 0.3%
5.4% 3.2% 0.8%
4.8% 2.7% 2.1%
source: ey-dkm forecasts. f: forecasts
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