Commission cuts growth forecast but Ireland bucks trends for now
The European Commission has cut its growth forecasts yet again, reflecting sluggish manufacturing in its German economic heartland and the rising risks of Brexit and a trade war with the US.
Even as it trimmed its eurozone economic growth forecasts for next year to 1.4pc from the 1.5pc it believed was possible in its projections made in May, it said it expected the Irish economy to grow by 3.4pc in 2020 after 4pc this year.
"The resilience of our economies is being tested," European Commission vice-president Valdis Dombrovskis said yesterday.
The commission forecasts the German economy will expand by 0.5pc, while Italy will continue to tread the cusp of recession with growth of just 0.1pc.
The lower growth forecasts for 2020 come as the world's leading central banks, the European Central Bank included, are expected to start cutting interest rates and resume their purchases of government bonds in an effort to boost economic growth.
The commission's rosy view of Ireland's growth path was tempered by a publication from the National Competitiveness Council, which warned of over-dependence on a narrow range of export products and countries as well as a small number of companies for "the vast majority of productivity performance".
"Should there be negative shocks to the relatively few firms on which we rely, this would have a disproportionate impact on the whole economy," Peter Clinch, who chairs the council, wrote.
Estimates from the International Monetary Fund show that in the event of the US imposing across-the-board tariffs on imports, Ireland would be hit harder than any other country, including Germany.
US President Donald Trump has hit China with hefty tariffs and imposed smaller ones on Europe in a dispute between aircraft makers Boeing and Airbus. He also threatened tariffs on car imports, a move that would hit Germany hard and trigger tough EU retaliation.
The risks of a hard Brexit are also growing and there was a stark reminder from UK Brexit Secretary Stephen Barclay that London would use its economic leverage over Dublin to push for concessions.
"A no-deal outcome would be very damaging for Ireland. If one looks, for example, 40pc of their exports go through Dover," he said.
The new commission forecasts made little mention of Brexit on Ireland, other than to warn the economic outlook here was "clouded by uncertainty". The Department of Finance and the Central Bank have warned economic growth here could shrink to zero and 50,000 people could lose their jobs as a result of a hard Brexit.