DUBLIN – Ireland’s central bank on Wednesday highlighted the risk of overheating in the economy in its latest quarterly bulletin as it raised its growth forecast for the Irish economy and lowered its forecast for unemployment.
The revisions come as the Irish economy operates at close to full capacity and continues to expand despite the risks posed by Brexit and an uncertain international trading environment.
Ireland’s economy has been the best performing in Europe since 2014 and is likely to be among the best performers again this year after the bank revised its forecast for economic growth upwards to 4.9% for 2019, from a previous 4.2%, and 4.1% in 2020, from a previous 3.6%.
With the jobless rate already at 4.6% in July, the central bank also estimated unemployment would average 4.7% across this year, a downward revision of 0.3%.
Unemployment peaked at 16 percent in 2012, when Ireland was midway through a three-year international bailout, but has fallen sharply in recent years as the economy rebounded.
The central bank’s official forecasts assume Britain leaves the EU with a deal as scheduled, which would include a transition period to help minimise disruption.
But the bank warned that the situation would be very different if there was a disorderly Brexit, with a sudden and severe economic shock as British demand for Irish goods collapses and fresh falls in sterling weigh on the competitiveness of Irish exporters.
“In the event that a no-deal Brexit were to occur there would be a significant weakening of activity across many parts of the economy,” said Director of Economics and Statistics, Mark Cassidy
“Our current projection is that in the event of a no-deal Brexit, the economy would expand by 0.7 per cent in 2020, as opposed to 4.1 per cent if a deal can be agreed.“
The bank also estimates that rate of growth in employment in a disorderly Brexit would be substantially lower than currently forecast with around 34,000 fewer jobs in the economy by the end of 2020.
(Reporting by Graham Fahy; Editing by Alexandra Hudson)