Ireland

   
 

Executive Summary

Robust growth with declining unemployment
In 2019, the Irish economy again performed impressively for key macroeconomic indicators. GDP growth was close to 5% and GNP growth was over 4%. Unemployment fell to 5%, a remarkable achievement given that it had been as high as 16% in 2012. Inflation remained at a very low rate of around 1%. The general government balance was in surplus at 0.2% and the general government debt as a percentage of GDP was 59%. Against a background of sluggish global growth and increasing uncertainty over the United Kingdom’s approach to Brexit, it marks a significant achievement that the Irish economy was able to produce such positive macroeconomic indicators. 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 there will be a new arrangement following the general election in February 2020.
Brexit entails significant uncertainties
Once again, 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 October 2019 agreement between the United Kingdom and the European Union appears to avoid the catastrophic scenario of a no deal Brexit. It also removes the threat of a terrestrial border between Northern Ireland and the Republic of Ireland with the trade border to be determined by the Irish Sea, meaning that customs arrangements will be based in the airports and sea ports between Northern Ireland and the United Kingdom.
UK declines will be
felt in Ireland
The implications for the Irish economy, while dependent on the nature of the new structure, will be considerable. At the macro level, any significant 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 greatest risk in the case of a hard Brexit. Ireland’s improved economic performance is attributable to relatively sound policy decisions, historically low interest rates and, most significantly, the continued growth of the export-driven multinational corporation sector.
Citations:
Department of Finance, Budget 2020
ESRI Quarterly Economic Commentary Autumn 2019 by Kieran McQuinn, Conor O’Toole and Matthew Allen-Coghlan
Central Bank of Ireland Quarterly Bulletin, July 2019
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