As published in the Stability Programme Update 2019, my Department has forecast GDP growth of 3.9 per cent this year and 3.3 per cent in 2020. This growth is expected to be broad based, with both domestic demand and net exports making positive contributions. Indeed, modified domestic demand is forecast to grow by 4.0 per cent this year and by 3.3 per cent next year.
Indeed as a barometer of how well our economy is performing, there is no story more positive than the one emanating from our labour market. The strong growth in employment over the last number of years has continued into this year, with total employment increasing by 45,000 (+2.0 per cent) in the year to Q2 2019. As a result, there are now 2.3 million people at work in Ireland.
As part of Budget 2020 my Department will publish updated forecasts next month.
In an EU context, Ireland remains one of the fastest growing Member States. The strong growth and performance seen in our economy is also clearly illustrated by a comparison with the performance of our main trading partners – the Euro Area, the UK and the US.
For the Euro Area the European Commission is forecasting growth of 1.2 per cent this year, and 1.4 per cent next year. The GDP forecast for the EU28 is for growth of 1.4 per cent in 2019 and 1.6 per cent in 2020. This represents a significant slowdown from the growth rates seen in 2015-2017.
The performance of individual Member States is diverging with some areas (e.g. Central and Eastern Europe, Malta, and Ireland) expanding faster than others (e.g. Italy, Germany).
For the UK, modest GDP growth of 1.3 per cent is expected this year and 1.4 per cent next year, based on a technical assumption of status quo in terms of trading relations between the EU27 and the UK.
The US economy continues to benefit from several tailwinds, supporting GDP growth of 2.6 per cent is expected this year, although this is expected to moderate to 1.9 per cent in 2020 as fiscal stimulus unwinds.
In common with Ireland, there has been a recovery in employment growth in all our main export markets – though at a more modest pace – with a corresponding reduction in unemployment.