DUBLIN: Ireland’s central bank on Thursday hiked its economic growth forecasts for 2017 and 2018, but said domestic demand would be slightly weaker than expected. Gross domestic product would grow by 4.9 percent this year and by 3.9 percent in 2018, the central bank predicted, up from July forecasts of 4.5 percent and 3.6 percent respectively.
Ireland’s economy has been the best performing in the European Union since 2014, but until April the central bank had spent a year nudging down its growth expectations, anticipating a blow from neighbouring Britain’s vote to leave the EU. The bank said on Thursday the impact of Brexit to date had been muted, but that it added significant uncertainty to the country’s economic outlook. An also optimistic central government this week forecast Irish growth of 4.3 percent this year and 3.5 percent next. The bank said its main measure of domestic economic activity, modified domestic demand, would grow 4.2 percent in 2017 and 3.9 percent in 2018, down from earlier forecasts of 4.5 percent and 4.0 percent, respectively. The Central Statistics Office indicator strips out the distorting effect of large multinational activity that inflated Irish GDP growth to 26 percent in 2015, a figure that led U.S. economist Paul Krugman to dismiss the country’s economic indicators as “leprechaun economics”.
The Central bank said the higher GDP figures reflected weaker than expected import growth and a stronger forecast for investment in intangible assets, two measures impacted by multinational activity. There had been a “pronounced weakness in contract manufacturing activity,” it said. But it was generally positive about an economy it projected to “remain on a favourable growth path.” “A range of spending and activity indicators suggest that the underlying picture is that growth has continued at a relatively strong pace in the first half of 2017,” it said.
