Sunday 19 November 2017

Central Bank lauds Ireland's 'Phoenix Miracle' economy

Gabriel Fagan, chief economist of the Central Bank
Gabriel Fagan, chief economist of the Central Bank
Colm Kelpie

Colm Kelpie

The Central Bank has revised up its growth forecasts on the back of strong domestic demand despite citing the twin threats of Brexit and the potential economic policies of President Donald Trump.

Chief economist Gabriel Fagan lauded the economy’s performance and said it had all the hallmarks of the ‘Phoenix Miracle’ – the theory that economies can recover from a crisis without the need for credit growth.

He argued Ireland had a “sustainable economic model” based on foreign direct investment and the inflow of capital and expertise from international companies, unlike some other Eurozone economies hit by the financial crisis.

And he said Ireland was now a high-skill, high wage economy.

“If you look at the literature on the Phoenix Miracle, the key feature is a strong recovery in activity, employment and output, but very weak movement in credit and debt,” Mr Fagan said.

“That’s the key distinguishing feature of such miracles that have been identified, and I think the Irish case fits the bill precisely more or less.”

The Central Bank has revised up its growth forecasts for this year and next by 0.2 percentage points to 3.5pc for this year and 3.2pc in 2018.

In its latest quarterly snapshot of the economy, the Central Bank said that despite the concerns about Brexit and the weakness of sterling, recent evidence points to a broadening of recovery on the domestic side of the economy, with consumer spending continuing to grow and the “revival” of the construction sector gaining traction.

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