Ireland’s economy is expected to continue to grow at a robust pace in the coming years. As I outlined in Budget 2019, my Department has forecast GDP growth of 7.5 per cent this year and 4.2 per cent in 2019.
This growth is expected to be broad based, with both domestic demand and net exports making positive contributions. Indeed, modified domestic demand, which strips out some of the volatile components of demand associated with the activities of multinationals, is forecast to grow by 5.2 per cent this year and by 4.1 per cent in 2019.
In the subsequent years (2020-2023), GDP growth is expected to average just under 3 per cent annually, broadly in line with potential growth. These forecasts take into account our central scenario with regard to Brexit, namely that a transition period will be agreed that extends or replicates existing frameworks until end-2020, in other words, the UK is assumed to remain in the single market and customs union until that point. From 2021 onwards, the baseline forecasts assume that the EU and UK will conclude a free trade agreement. This is expected to lower the level of GDP by almost 2 per cent over the period 2021-2023, relative to a baseline scenario of no Brexit, which is accounted for in my Department's forecasts.
As well as Brexit, there are a number of other external risks I am monitoring closely. These include a disruption to world trade due to protectionism, a faster-than-expected normalisation of monetary policy, and policy changes in other jurisdictions that affect the competitiveness of Ireland’s corporate tax regime.
As Minister for Finance, the best means available to me to mitigate these risks is to continue careful management of the public finances, and improve the resilience of the economy, including by implementing competitiveness-oriented policies.