The Irish economy is projected to continue its strong expansion in the next two years. Exports will rise in line with increasing demand in its trading partners. Business investment should remain robust thanks to rising profitability and favourable financing conditions. Growth will provide momentum to job creation and reduce the still high rate of unemployment, thereby spreading the fruits of the recovery more widely. Household consumption will be supported by labour earnings growth.
Fiscal policy is expected to exert a smaller drag on activity than in past years, while the government remains on track towards its medium-term goal of balancing the budget. Fiscal windfall gains from strong economic growth and low interest costs should be used primarily for more rapid reduction of public debt. A fiscal package of EUR 1.5 billion in 2016 (0.7% of GDP) should prioritise getting more people back into work by revamping the tax and benefit system and enhancing activation policy.
Measures targeted on the agricultural sector will also be needed to meet Ireland's target of a 40% reduction in greenhouse gas emissions by 2030. The announced six-year plan on public investment will revitalise public transport, infrastructure and services. The plan should focus on increasing the density of the metropolitan area, which will help to increase the viability of public transport and lower emissions of greenhouse gases.