EY expects Irish economy to continue to grow
GDP expected to grow 3.1% this year and 2.9% next as the North’s economy slows
The weakness of sterling has affected cross-border trade patterns already, according to EY. Photograph: Owen Humphreys/PA Wire
The resilience of the Irish economy is likely to be tested in an “uncertain” 2017 but it will grow by an average of 2.7 per cent per year over the next four years, according to the latest forecasts from EY.
The accounting giant cautioned that economic forecasts for both the Republic of Ireland and Northern Ireland were “highly conditional” at this point in light of uncertainty about the form the UK’s exit from the European Union will take.
On balance, however, it expects the Republic’s economy to prosper, with gross domestic product (GDP) growing 3.1 per cent this year and 2.9 per cent in 2017, and employment continuing to rise.
The economy “enters this turbulent period in ruder health than might have been expected”, but 2017 will be “tougher going” than 2016, said Neil Gibson, economic adviser to EY’s Economic Eye report.
The pace of jobs growth in the 2016-2020 period will be slower than it was in the 2012-2015 recovery phrase, but the economy will nevertheless close in on its previous peak employment level, reached in 2007.
After a painfully gradual emergence from the downturn, the retail sector will “gather significant pace”, with consumer spending driving an additional 24,000 jobs, EY said. The prospects for export-orientated sectors are less assured.
“Though the outlook is for Ireland to create more jobs, much depends on the detail of the exit deal,” Mr Gibson said.
The Republic’s employment growth and wider economy is expected to outperform that of Northern Ireland.
Economic growth will slow in the North next year with significant job losses expected, but overall it will avoid a post-Brexit recession, EY said.
Its Economic Eye winter forecast publication predicts Northern Ireland’s growth rate will decline significantly to 0.5 per cent next year.
“Our forecast takes a ‘hard-Brexit’ view and suggests a fairly pronounced squeeze on Northern Ireland resulting from Brexit and the re-emergence of inflation and falling real wages, and consequently it factors in a decline in consumer spending in 2017,” said Michael Hall, EY Northern Ireland managing partner and head of markets.
He said that the weakness of sterling had already affected cross-border trade patterns and there was a question mark over how the currency would perform as the Brexit process unfolds.
EY forecasts that economic growth in Northern Ireland will climb back to 1.2 per cent in 2018, but that throughout the 2016-2020 period, job losses could be in the region of 6,000.