Brexit uncertainty remains our chief economic challenge
Competitiveness concerns in Dublin, allied with the Brexit risk to rural Ireland, present the greatest risk to the economic outlook, according to a report published this morning.
The Economic Eye Summer Forecast from financial services firm EY predicts economic growth across the island to be at 2.4pc until the end of the decade, with 91,000 new net jobs by 2020.
But the study said the country’s resilience and competitiveness will continue to be tested in the face of global and economic political developments. And job losses in the agriculture sector, regarded as one of the most exposed sectors to Brexit, will total 12,800 by 2020. However, that figure is based on the UK crashing out of the EU in a worst-case scenario that would result in a default to World Trade Organisation rules.
Professor Neil Gibson, economic adviser to EY Economic Eye, said that with little clarity on Brexit, political uncertainty in Northern Ireland and Irish GDP data being affected by a range of factors, all-island forecasting has never been more challenging.
“Six months on from our last forecast, there is no more clarity on exactly what shape Brexit will take, and in the absence of information on trade deals, customs and Border plans, and migration policy, caution must be placed on any forecasts.
“The exit process for the UK is likely to be fairly bumpy, and although it makes clear economic sense to arrive at a sensible trade arrangement, that cannot be assumed.”
The report also states that inflation and wages data will be critical to watch in the coming months. While jobs growth in the Republic of Ireland will outperform Northern Ireland and Britain, that will bring its own challenges.
“Increasing demands for public services, skills and talent shortages in the private sector, the rising cost of living, and housing shortages in Dublin will all place clear upward pressure on wages and cause them to rise by an average of 3pc per annum by 2020,” the EY assessment said.
The forecast states that improving domestic conditions are supporting many of the sectors hardest hit during the recession towards recovery, with wholesale and retail to grow by 19,400 jobs and construction to be boosted by 18,500 jobs.
The uncertainty generated by the UK’s looming exit from the EU was also reflected in Bank of Ireland’s latest economic pulse, published today. The survey, which combines readings of confidence from both the consumer and business sectors, hit 91.8 in June – down 0.6 points on May’s reading.
According to the bank’s chief economist, Dr Loretta O’Sullivan, the survey remains significantly off its pre-Brexit levels.
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