Thursday, 5 March 2020
Department of Finance
Growth in the first three quarters of 2019 remained strong, with GDP up 5.9 per cent year-on-year over that period, with the full year estimates for 2019 due for release by the CSO very shortly.
Of course, in recent years, GDP has become distorted by the activities of a small number of large multinational firms that often reflect a number of exceptional factors which have limited impact on actual activity in the domestic economy. However a range of domestic measures, such as modified domestic demand and household consumption, have also been growing robustly. Indeed, the best barometer of how well our economy is performing is the labour market where we currently have record employment levels.
The strength of our economy, in part, reflects the important steps we have taken to improve our competitiveness. The 2019 IMD World Competitiveness Yearbook recently ranked Ireland as the 2nd most competitive country in the EU and the 7th most competitive country in the world. In addition, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 25 per cent since 2008. Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. In 2019, average annual inflation was just 0.9 per cent.
On wage developments, average weekly earnings increased by 3.5 per cent year-on-year in 2019. The rise in household incomes is a welcome development, however it needs to be monitored closely as a significant acceleration in wages would undermine Ireland’s competitiveness relative to other European countries.
Despite the positive outlook for our economy, the risks over the coming years are numerous and primarily external in nature. Perhaps the most pressing at the current moment is the potential economic implications of the outbreak and spread of the coronavirus. Furthermore there is ongoing uncertainty surrounding the precise nature of the future trading relationship between the EU and the UK. Any further disruption to trade or a further slowdown in global growth would have a disproportionate impact on the Irish economy.
The best way we can mitigate against these risks is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies.