DUBLIN (Reuters) - Ireland trimmed its economic growth outlook for the years following Britain’s future exit from the European Union only marginally on Tuesday, saying consumer spending would offset most of the hit to export growth.
Ireland’s economy, which has been the best performing in the EU for the last three years, is widely considered the most vulnerable among the the bloc’s 27 remaining members to Brexit due to its close trading links with its nearest neighbour.
But Finance Minister Michael Noonan said on Monday growth forecasts had been boosted to 4.3 percent for this year and 3.7 percent next year, an average increase of half a percentage point each.
His department pared back its forecasts for gross domestic product (GDP) growth post-Brexit by the smallest of margins on Tuesday, seeing growth moderating from 3.1 percent in 2019 to 2.5 percent in 2021.
“The evidence that the exit will be detrimental to the UK economy is fairly compelling, and the short- and medium-term trajectory for growth in a key trading partner is far from clear,” it said in its biannual update to its outlook.
While forecasts for export growth were cut by 0.2 to 0.5 percent from 2019 and 2021 with the expected slowdown in the UK, personal consumption growth was upgraded by 0.7 percent in each of those years.
That reflected a labour market that continues to improve far quicker than expected. The department sees the jobless rate falling below 6 percent by the end of this year compared to an average rate of 7.7 percent for 2017 seen six months ago.
Ireland could therefore reach full employment next year, it said, with the unemployment rate forecast to remain at 5.5 percent from 2018 onwards.
That resilience would leave the economy better prepared for Brexit. The department has previously said that a “Hard Brexit” that resulted in trade with the bloc governed by World Trade Organisation rules could leave Irish GDP almost 4 percent off where it otherwise would have been within a decade.
It also maintained its expectation that Ireland’s budget deficit will fall to 0.4 percent of GDP this year.
Reporting by Padraic Halpin; editing by Andrew Roche