Economist warns of harder times to come as fears rise over Irish growth
KBC chief economist Austin Hughes says there is still plenty to be positive about
Austin Hughes speaking at the PwC Budget breakfast in Spencer Dock in Dublin. Photograph: Dara Mac Dónaill
While the economic outlook for the Republic remains favourable there is no doubt that growth will soften in the coming years, due primarily to external factors, a post-budget briefing heard on Wednesday.
Austin Hughes, chief economist with KBC Ireland, said while many countries would still be envious of our likely growth, concerns of the economy overheating were now firmly in the past.
“The outlook for the economy is fair but fragile with plenty of threats on the horizon,” he said, addressing an event organised by PricewaterhouseCoopers.
Mr Hughes said a number of external factors, including continued trade tensions, Brexit, rising oil prices and mounting weakness in emerging markets, were all threats to the Republic.
“We see growth slowing to 3.5 per cent next year. The Department of Finance is a little more optimistic than we are but it too predicts a major softening in the growth momentum to about 4.25 per cent. These are still rates that most countries in the world would give their eye teeth for so we’re not talking about a collapse in Irish economic conditions. But we will see a slighter cooler rate of growth and that will continue over the following years, falling to slightly below 3 per cent by 2020.”
“That is still decent, still positive, but it is a little less dramatic and will certainly remove all talk of a boom,” Mr Hughes added.
His comments come as the IMF, which is holding its annual meeting in Bali, Indonesia this week, cut its growth forecast for the first time in over two years while warning that expansion in the world economy is plateauing.
The IMF projected a global expansion of 3.7 per cent this year and next, as against the 3.9 per cent projected three months ago. This is the first downgrade since July 2016.
On Budget 2019, Mr Hughes said the Government’s package of measures was about spending rather than tax.
“By and large (the budget) was a case of how can we get the money in,” said Mr Hughes.
“We are going towards a revenue-raising regime rather than an economy that is really competitive and looks to be focused on balancing conflicting objectives,” he added.
Mr Hughes said that Budget 2019 did not “Brexit-proof” the economy despite claims to the contrary.
“No budget could do that but it doesn’t make major mistakes,” he said.
“The major concern I’d have is that there is an expectation that all will be alright. That the rate of spending will magically come down over the next while and that taxation will continue to increase. All of this is in spite of a focus on what should tax be doing in the economy other than simply raising money.”