Brexit may be a big concern but that hasn't stopped Bank of Ireland from hiking its economic forecast for the Irish economy based on continuing rising domestic demand.
In its latest economic outlook, the bank has revised Ireland’s gross domestic product growth projections from 3.2 per cent to 4.8 per cent this year and to 3.8 per cent from 3.1 per cent for 2018.
Group chief economist Loretta O’Sullivan said 2017 had got off to a positive start with GDP up 6.1 per cent on an annual basis in the first quarter and employment growth coming in at 3.5 per cent.
“On the back of these developments, we have revised our forecasts up. The overarching narrative regarding the Irish economy remains one of an ongoing recovery in domestic demand, reflected in solid consumer spending and construction investment in particular. Export growth is also expected to continue, but is vulnerable to the unsettled external environment,” she said.
While geopolitical risks such as Brexit and the policy agenda of the new US administration have generated uncertainly, Dr O’Sullivan noted that two in three Irish firms are still aiming to expand their businesses in the coming years.
BoI said investment will likely rise by 3.5 per cent in 2017 and by 6 per cent in 2018 despite an increase in the number of companies adopting a “wait and see” approach to business decisions due to geopolitical concerns.
With economic activity stronger, the bank has revised up its employment growth forecasts to 3 per cent for this year and 2.4 per cent for 2018.
It said increasing employment, rising incomes and lower levels of debt are expected to lead to improved consumer spending. Weaker than expected inflation will also provide a boost with personal consumption growth of 3.2 per cent forecast for 2017 and 3 per cent for the following year.
Dr O’Sullivan also forecast export growth of 4.8 per cent for both 2017 and 2018, which is slightly higher than in previously forecasts.