Recent economic indicators have generally been positive, indicating that the recovery is continuing in a sustainable manner.
Preliminary real GDP growth of 7.8 per cent was recorded for 2017, but this is heavily distorted by activity in the multinational sector. Modified domestic demand, which adjusts for distortions in the Irish economy, is up 4.0 per cent in 2017. Growth is broad based with net exports also contributing positively to growth last year.
The strength of domestic demand is being felt in the labour market. Employment growth remains strong with an annual rate of 2.9 per cent recorded in 2017, representing the creation of over 61,000 additional jobs.
Recent data indicate that momentum has continued into 2018:
- Expansion in the manufacturing and services sectors continued in April according to the Purchasing Managers’ Index for the respective sectors
- Core retail sales, i.e., excluding car sales, are up 4.3 per cent in Q1 2018 y-o-y
- The Consumer Sentiment Index was 104.0 in April, well above its long run average.
- The seasonally-adjusted monthly unemployment rate for April was 5.9 per cent, down from 6.8 per cent in April 2017. As a result, the unemployment rate has fallen by almost two thirds since its peak of 16 per cent in early-2012.
As part of the 2018 Stability Programme Update, my Department forecast real GDP growth of 5.6 per cent this year. The labour market should benefit from this, with employment growth of 2.7 per cent (60,000 jobs) expected this year.
However, there are a number of risks at present including the UK’s decision to exit the EU, tax reform in the US and an increase in protectionist measures. There are also domestic challenges such as housing supply pressures and the related challenge of maintaining competitiveness.
The best way to mitigate such risks is to improve the resilience of the economy. The Government will play its part by continuing to implement competitiveness-oriented policies – including those that address emerging bottlenecks – and ensuring that the public finances continue to be managed in a prudent fashion.