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The economy is projected to keep growing robustly, as domestic demand is set to remain solid. As the labour market tightens, wage pressures will continue to be strong and are projected to feed into higher inflation. Output is expected to expand at a slower pace than in past years due to already high labour costs and high external uncertainty, including about the final outcome of the Brexit negotiations.
The government should ensure that its medium-term goal of balancing the budget is met. It leaves room to use fiscal policy to support growth if needed, while avoiding over-heating pressures in the economy. Structural policy should prioritise getting more people back into work by enhancing government programmes that improve the skills of the long-term unemployed.
Private sector debt remains high, as some households and corporations are heavily indebted with poor prospects of debt repayment. As a consequence, the stock of non-performing loans (NPLs) remains stubbornly high, while banks often extend forbearance, which impairs the Irish banking system. The authorities should address high indebtedness by strengthening insolvency regimes and support a further resolution of NPLs by ensuring collateral enforcement and NPL write-offs.
Economic Survey of Ireland (survey page)