Economic outlook, analysis and forecasts

Ireland - Economic forecast summary (June 2016)


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The Irish economy is projected to continue its robust expansion in 2016 and 2017. Both exports and business investment, which surged due to temporary impetus by multinational enterprises, will moderate but remain solid. Activity in the domestic sector will remain firm and employment will grow steadily. Wage growth will be strong as the labour market tightens. Household consumption will be solid, supported by labour earnings growth and tax cuts.

The government is assumed to remain on track towards its medium-term goal of balancing the budget. The overall balance is projected to improve, but owing largely to cyclical conditions. Strong revenue growth and low interest costs should be primarily used for a more rapid reduction of still high public debt. Structural reforms should prioritise getting more people back into work by enhancing activation policy, which would spread the benefits of increased prosperity widely across society.

Productivity growth has been trending down for some time, in association with a slowdown in knowledge-based capital (KBC) investment. The recent surge in KBC investment by multinational enterprises will lift productivity growth. However, the diffusion of innovation to smaller, national firms is likely to be limited by the weak linkages with multinationals. Public support to business R&D, which is skewed towards R&D tax credits, should be rebalanced towards more direct support for domestic SMEs.

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