Fastest-growing European economy since 2014
The successful implementation of policy reforms by the Irish authorities has borne fruit. Ireland has positioned itself as the fastest-growing European economy since 2014.
GDP increased by +5.2% in 2016, mainly driven by domestic demand growth. Continued double-digit investment growth has been supported by the very attractive business and fiscal environment and the UK’s vote to exit the EU. Private consumption has been supported by the labor market improvement (see Figure 2) and rising wages.
The improving trade momentum at the global scale since H2 2016 and the stronger growth in the eurozone boosted export performance. The end of deflationary pressures – inflation rate expected at +0.5% in 2017, in positive territory for the first time since 2013 - has also triggered positive nominal effects (see Figure 3) and helped improve firms‘ pricing power.
We expect trade to remain a key driver of GDP growth in 2017 given the slightly lower EUR (1.08 against the USD after 1.11 in 2016), stronger eurozone growth (+1.9% in 2017) and the improving global economy. GDP growth is forecast to reach +6.1% in 2017 and +4.2% in 2017.