Saturday 30 July 2016

Irish economic growth set to be three times the EU average

Sarah Collins in Brussels

Published 06/11/2015 | 02:30

The Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, gives a press conference to announce the European Union Autumn 2015 Economic Forecast at the Commission headquarters in Brussels. Photo: Reuters
The Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, gives a press conference to announce the European Union Autumn 2015 Economic Forecast at the Commission headquarters in Brussels. Photo: Reuters

Ireland will be the EU's fastest-growing economy this year and next, the European Commission has predicted.

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In its latest economic forecast, the Commission said Ireland's economy will expand by 6pc this year. This is almost double last spring's estimate and far outstripping the EU average of 1.9pc.

The Commission said the growth would be on the back of buoyant consumer spending, investment and exports.

Ireland's economic growth will continue to top the EU's table next year at 4.5pc, but it will drop to joint second place in 2017 at 3.5pc, the Commission predicted, when Romania will grab the top spot.

The EU's figures differ slightly from the Government's budget day predictions of 6.2pc growth this year, 4.3pc in 2016, and an average of 3pc for the years after.

The EU warned that housing constraints and high debt could pose risks to the Irish economy over the next two years.

However, Ireland's recovery will be "employment-rich", said the Commission, with the jobless rate falling from 9.5pc this year to 7.9pc in 2017 and job creation staying positive. Unemployment in the euro area will stick at double digits, falling from 11pc this year to 10.3pc in 2017.

The EU's figures show that Ireland's budget deficit - the excess of spending over the tax take - is estimated at 2.2pc of gross domestic product (GDP) in 2015 and falling to 1.5pc of GDP next year and in 2017. The EU's upper limit is 3pc.

But gross debt - the amount the Government borrows to finance past and future spending - is to remain in the EU's top seven this year at 99.8pc of GDP, falling to 93.7pc in 2017.

The figures don't take into account the spectre of the UK leaving the EU in a referendum slated for 2017, an outcome that would deal a massive blow to Ireland's economy, the Economic and Social Research Institute said this week.

"We all expect and want the United Kingdom to stay in the European Union, which is positive as well for the EU and for the UK itself," EU economics chief Pierre Moscovici said. "Everybody knows it would be a more than important policy change," he said of the effects of a possible UK exit. Business and employers' group Ibec said the Government should plan for the worst. "While the UK remaining as a strong, core EU member is the overwhelming preference of Irish business, a UK exit would throw up a wide range of possible outcomes, some potentially very damaging for Ireland and the Irish economy," said Mary Rose Burke, Ibec's director of policy and corporate affairs.

Ireland's growth rates contrast starkly with the average growth in the 28-member EU, which is predicted to come in at only 1.9pc this year, with Greece slipping back into recession.

EU growth is expected to pick up slightly to 2pc in 2016 and 2.1pc in 2017.

Pierre Moscovici said that EU growth is vulnerable to a slowdown in emerging markets, especially China, and geopolitical tensions, but that an influx of refugees into Europe over the next two years could give a slight boost to the bloc's economy.

"The European economy remains on recovery course," Mr Moscovici said. "Major challenges remain: insufficient investment, economic structures that hold back jobs and growth, and persistently high levels of private and public debt.

The forecasts will feed in to the Commission's assessment of Budget 2016, which will be published later this month.

Irish Independent

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