156
Ireland Economic growth is projected to remain robust, but to ease gradually to 3.9% in 2019 and 3.3% in 2020. Abstracting from the volatile activities of multinational enterprises (MNEs), underlying domestic demand growth will remain solid, supported by strong construction investment. Equipment investment growth will moderate somewhat amid ongoing uncertainty around the Irish economy, notably that related to the Brexit process. As the unemployment rate has fallen to historically low levels, job growth will moderate but wage pressures will remain strong, feeding into higher inflation. The improvement in the fiscal position is expected to slow in the near term. The government should remain committed to improving the public finances, but it should stand ready to mitigate disruptive consequences if significant risks materialise, such as a disorderly conclusion of the Brexit negotiations. As property prices have recovered strongly over the past years, the property tax yield should be raised through more regular revaluations of the base, which would also help rationalise property purchase demand. The strong expansion continues Underlying domestic demand grew by around 4.5% in 2018. Solid consumption has been driven by strong gains in employment and income. With the unemployment rate having declined rapidly, wage growth has already become strong. However, inflation remains muted, pulled down by lower import costs. Both consumption and equipment investment have weakened over the past few quarters, while consumer confidence and business sentiment declined since early 2019, on the back of high external uncertainty. In contrast, construction activity has kept momentum, reflected in strong growth in planning permissions and completions. Although new housing completions have been catching up with demand, there will continue to be shortages in the dwelling stock for some time.
Ireland Wage pressures are significant Y-o-y % changes 6
Construction activity will remain strong % of labour force 18
← Hourly wages
5
Unemployment rate →
15
% change 120 100
12
3
9
2
6
1
3
0
0
-1
-3
-2
-6
-60
2009
2011
2013
2015
2017
← Planning permissions, new houses and apartments Residential investment →
80
4
← New dwelling completions
Y-o-y % changes 60 50 40
60
30
40
20
20
10
0
0
-20
-10
-40
-20 2012
2014
2016
2018
-30 2020
Source: Central Statistics Office Ireland; and OECD Economic Outlook 105 database. StatLink 2 https://doi.org/10.1787/888933934565
OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 1: PRELIMINARY VERSION © OECD 2019