Executive Summary

Robust growth with declining debt
In 2018, Ireland achieved the fastest rate of economic growth in the euro zone. The macroeconomic data for Irelands suggests that 2018 may be comparable to 2000, the “golden year” when the first phase of the Celtic Tiger peaked. In 2000, against a background of full employment and significant immigration, the economy achieved a growth rate of around 9% of GDP and public-sector debt fell to 38% of GDP. In 2018, notwithstanding a deep depression between 2008 and 2013, the economy had recovered to a 8.9% rate of economic growth, as measured by GDP (ESRI forecast), and public-sector debt had fallen to close to 60% of GDP. All of this was achieved in an environment of almost full employment – the unemployment rate had fallen to 5.3% by the end of 2018.
Major indicators reflect positive conditions
All of the major macroeconomic indicators, with the exception of investment expenditure, have been positive. Consumption expenditure grew by over 3%, exports by between 5% (central bank forecast) and 7.5% (ESRI forecast), and underlying domestic demand by 5.6%. The current account balance of payments was estimated to be €37 billion or 11.5% of GDP in 2018. Inflation as measured by the Harmonized Index of Consumer Prices was only 0.8% with an expectation that low inflation will continue through into 2019.
Stable political environment
On the political front, the confidence-and-supply agreement between Fine Gael and the main opposition party, Fianna Fáil, negotiated after the 2016 general election, remained in place with an expectation that this modus vivendi would continue for another year.
Brexit poses deep uncertainties
At the time of writing, it is impossible to predict which particular path the United Kingdom will adopt, or be forced to adopt, with respect to exiting the European Union. The implications for the Irish economy, while dependent on the nature of the new structure, will be considerable. At the macro level, any sustained fall in the United Kingdom’s economic growth rate will have repercussions for Irish exporters. Additionally, any sustained fall in the value of sterling relative to the euro will pose problems for import-competing companies in Ireland. The labor intensive agri-food sector has been identified as the sector at the greatest risk in the case of a hard Brexit.
Sound policy decisions, good environment
Overall, as in 2017, Ireland’s improved economic performance is attributable to relatively sound policy decisions and favorable external conditions, including strong economic growth in the United States, reasonable economic growth in the euro zone and the persistence of historically low interest rates in Ireland.
Department of Finance, Budget 2019
ESRI Quarterly Economic Commentary September 26, 2018 by Kieran McQuinn, Conor O’Toole and Philip Economides.
Central Bank of Ireland Quarterly Bulletin October 2018 No. 4.
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