The Central Bank published the Quarterly Bulletin (QB 2 – April 2018) today. The economy continues to perform well with the growth outlook revised upwards by close to half a percentage point to 4.5 per cent on average in 2018/19 (relative to the last set of forecasts in January). This outlook is underpinned by robust domestic demand, solid prospects for the labour market and a supportive international environment. At the same time however, a number of significant tail risks remain. These predominantly relate to the vulnerability of the economy to external shocks, namely Brexit related exposures, any increase in protectionist trade policies, changes to international tax regimes (that could affect FDI decisions) and disruptive exchange rate movements.
Some of the forecast highlights within the Bulletin include:
- labour market – we now see the unemployment rate falling below 5 per cent to average 4.8 per cent in 2019, with close to 99,000 additional jobs being created this year and next. Annual employment growth is expected to average 2.2 per cent in 2018 and 2019, moderating from growth rates of close to 3 per cent in recent years
- domestic spending – underlying domestic demand (which attempts to strip out much of the noise in some of the components of investment) is forecast to grow by 4.3 per cent per annum in both 2018 and 2019
- trade – net exports are expected to support growth over the forecast horizon.
- inflation – consumer prices were subdued last year but we expect some pick-up towards closer to 1 per cent in 2018 and 2019, as the effects of past sterling weakness unwind coupled with strong domestic demand.
Aside from the normal commentary and forecasts for the economy, the Bulletin contains Boxes on:
- International economic outlook (Box A – page 11)
- Sterling depreciation (Box B – page 14)
- Leading indicators of new housing output (Box C – page 17)
- Vacancies and wage growth (Box D – page 22).
On the financing side of the economy, there are pieces on:
- Trends in Bank Lending to SMEs (Box A – page 35)
- Exposures of Irish-Resident Investors to Offshore Financial Centres (Box B – page 40).
The Bulletin includes two signed articles by Donnery, Fitzpatrick, Greaney, McCann and O’Keeffe (2018), on “Resolving Non-Performing Loans in Ireland 2010-2018” and one by Conefrey and McIndoe-Calder (2018) on “Where are Ireland’s Construction Workers?”