Gradual moderation of economic growth expected in 2020 and 2021 – Central Bank

• Strong pace of economic growth in the Irish economy over recent years continued in 2019
• A moderation of economic growth is expected in 2020 - GDP forecast of 4.8%, down from 6.1 % in 2019
• Even if an EU-UK trade deal is agreed, growth is expected to moderate further in 2021 to 4.2%

The Central Bank of Ireland has today published its first Quarterly Bulletin of 2020. The Bulletin examines recent trends in the domestic economy and provides the Central Bank’s forecasts for the Irish economy and its views on domestic economic policy issues.

The most recent data indicate that the Irish economy grew at a strong pace in 2019. Continued strong gains in employment and rising incomes supported domestic economic activity, with consumer spending and building and construction investment both growing strongly.

Despite the weak external environment, last year saw very strong growth in exports, though this was concentrated in a small number of sectors - pharmaceuticals and chemicals, computer processors and computer services. Outside of these sectors, however, growth in other export categories has been more modest and in line with subdued international trade and weaker demand in Ireland’s main trading partners.

The central forecast shows a gradual moderation in the pace of growth of the Irish economy. Following growth of 6.1% in 2019, GDP is forecast to grow by 4.8% this year and 4.2% next year. Growth in underlying domestic demand is projected to moderate from 4% in 2019 to 3.75% in 2020, easing further to 3% in 2021.

Given the slight easing seen over the past year, employment growth is projected to continue to slow somewhat from its previous very strong growth rate, with a further modest decline in the unemployment rate also in prospect.  This moderation in employment growth means that the growth in consumer spending is also projected to ease back somewhat from its current growth rate of over 3%. 

Mark Cassidy, Director of Economics and Statistics, said:

“The outlook for economic growth is broadly positive. While the economy has been growing strongly in recent years, the pace of that expansion is likely to slow down. Our forecasts are based on an assumption that an EU-UK trade agreement is in place from January 2021, but even in that scenario, which is not guaranteed, we still see the pace of economic growth gradually slowing.

“Employment is forecast to continue to grow, but at a more modest pace than in recent years. This will result in a slight reduction in the unemployment rate from present levels. The outlook is for labour market conditions to tighten a bit further as the effects of capacity constraints in parts of the labour market are felt.

“Economic growth in Ireland has remained remarkably resilient in recent years in the face of significant headwinds. Looking ahead, the key role of public policy should be to underpin stability by dampening potential volatility and enhancing the economy’s resilience to withstand shocks.”