The Irish economy continues to perform well, although the rising pitch of Brexit discourse and uncertainty is undermining what would potentially be even stronger growth. In Q1 19, real GNP was growing at a 6.3% y/y rate with a steady contribution from personal expenditure growth (2.9% y/y) and net export growth (11.5% y/y). Ignoring recent volatility in IP transfers and other intangibles, fixed investment in building and construction (a surrogate for the real economy) is steady at a 10.2% y/y rate, suggesting that Irish businesses have some resilience to Brexit uncertainty. This is also confirmed by June’s Irish composite purchasing manager index (54.4) suggesting that the short-term growth trajectory remains relatively strong, ahead of the eurozone (52.2) and well ahead of the UK (49.7), which is buffeted by uncertainty. Irish GDP is forecast to grow for the next five years, but the official rate will slow after distortions introduced in the mid-teens by BEPS (base erosion and profit shifting) fade. This is reflected in weaker fixed investment. Likewise, net exports are forecast to slow due to a combination of disrupted global trading conditions, weakness in China and the eurozone, and weaker sterling. Despite these worries, Ireland is forecast to outperform the advanced economies (G7) with an annualised growth rate of 2.3% pa in the five year period to end-2023, compared to 1.7% pa for the G7 as a whole.
