Global economic turbulence slows growth in Ireland

16 September 2019 3 min. read
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With Brexit uncertainty having brought the UK economy to a stand-still, the neighbouring Republic of Ireland has seen its economic performance far outstripping Britain in recent years. However, according to a new study from EY, the weakened performance of global markets will bring Ireland’s expansion in line with the UK by 2023.

While the confidence of small and mid-sized enterprise leaders in Britain and Ireland has taken a serious knock in the run up to Brexit, the performance of the two economies has been very different in recent years. While the expansion of UK markets has all but ground to a halt in recent months – prompting a growing number of experts to warn of an upcoming recession – Ireland has enjoyed such healthy growth levels that it has passed the number of jobs it hosted before the 2008 financial crisis.

While Ireland will continue to enjoy heightened growth compared to the UK for the next few years, however, a new report from EY has suggested that it is by no means insulated from worsening economic conditions. A weakened global economy has led to a number of predictions that there may well be a worldwide recession on the horizon, and amid this speculation EY has revised its economic forecast downwards for both 2019 and 2020 on the back of weaker global outlook.

Global economic turbulence slows growth in Ireland

Using a modified domestic demand technique – which removes the impacts of IP relocation and aircraft leasing to give a more accurate picture of the domestic economy – EY's latest Economic Eye report has concluded that growth for this year is now projected at 3.7%, down from the rate of 4.1% it had projected in June. This is expected to fall further in 2020 to 3.5%, but it should be noted that both of these figures factor in the assumption that there will be an orderly Brexit, something which seems increasingly unlikely under the new Government of Boris Johnson.

EY cautioned that economic growth in Ireland could fall to just to 1.3% next year if Britain leaves the EU without a deal. Indeed, a No Deal scenario could be catastrophic for the whole island of Ireland. A No Deal Brexit is projected to be sufficient to push Northern Ireland into recession, as EY predicted that the economy there is expected to contract by 0.6% next year. Meanwhile, No Deal would cut 60,300 jobs across the island of Ireland by 2022 – 41,500 in the Republic and 18,800 in Northern Ireland.

Even with a deal in place, meaning Ireland is less impacted by its close trading partner’s exit from Europe, the forecast beyond 2020 could still worsen for the Republic. While the UK and Northern Ireland are expected to see their economic growth levels slowly recover post-Brexit, as companies find new opportunities amid the rubble, Ireland’s growth is set to sink to 2.8%, roughly in line with Britain. The external economic climate seems to be the key to this decline, as the dual threat of trade wars and Brexit have the potential to derail the global economy, and subsequently Ireland’s rapid growth.

Michael Hall, Head of Markets at EY Ireland, said, “There is no doubt that the global outlook is becoming uncertain, but the continued level of job creation across the island highlights the quality of our businesses and their ingenuity to seek out opportunity, while at the same time managing and mitigating any potential risk, which will be key in 2019.”