Strong growth set to continue in 2018

In 2017, the Irish economy grew by 7.8 per cent. In 2018, GDP is expected to grow by 4.8 per cent, according to the latest ESRI economic forecast. GDP will grow by 3.9 per cent in 2019 based on a technical assumption that a European Economic Agreement (EEA) is in place between the UK and the EU. Strong domestic consumption and investment, along with improving international conditions, are the main factors underpinning this growth.

Unemployment averaged 6.7 in 2017 and is expected to decline to 5.4 per cent in 2018 and 4.5 per cent in 2019. Increased tax revenue will lead to budget surpluses in 2018 and 2019.

It remains difficult to produce accurate estimates of sustainable economic growth based on the current set of national accounts. Estimates of overall output growth as well as major components of growth such as investment and trade are influenced by large transactions of a select number of firms. It is important to continue developing new approaches that allow for estimates of growth that are more representative of activity in the real economy.

This is particularly pressing at present as the economy is growing at such a robust rate. Policymakers need to be able to accurately gauge when the economy is likely to encounter capacity constraints.

This report includes a Special Article examining how Brexit will impact the cost of living in Ireland. It finds trade tariffs could lead to an increased cost of living of between €892 and €1,360 per household per annum. Poorer households will be most affected as they spend a greater share of their expenditure on food products, which are likely to be imported from the UK.