Ireland's economy will slow down due to weaker global demand, says EC
The European Commission has trimmed its economic growth forecasts for this year and next due to weaker global demand and warned that Brexit and changes to the international tax regime pose risks to the budget.
The spring forecasts show the Commission expects the economy in the Republic to expand by 3.8% this year. That's down from expectations of 4.1% in the winter forecast.
A forecast of 3.4% growth for next year is down from an expected 3.7%.
The Commission said in a report yesterday that "Ireland's export growth rates are expected to moderate as support from global trade is waning".
Ireland's economy will still rank in the premier league of the eurozone, beaten only by Malta's 5.5% growth rate this year and in a tie with Slovakia.
It expects the bloc as a whole to post growth rates of 1.2% this year and 1.5% next.
The new forecasts compare with expectations from the Republic's Department of Finance for 3.9% growth this year and 3.3% in 2020.
"The uncertainty surrounding Ireland's economic outlook comes mainly from external factors, particularly the terms of the UK's withdrawal from the EU, as well as possible changes in the international taxation and trade environment," the Commission said.
It also warned that the domestic economy in the Republic may be overheating as unemployment has fallen.
The Commission expects the Republic's budget to be in balance this year, compared with government expectations of another small surplus.
The Commission also expects there to be a surplus equivalent to 0.3% of gross domestic product in 2020.
While the Republic's Minister for Finance Paschal Donohoe has pledged there will be no repeat of a €600m overspend on health this year, and has scheduled monthly meetings to keep a check on expenditure, the Commission said it expected "a drift in current expenditure in areas such as health".
"Risks to the fiscal outlook remain skewed to the downside, mainly reflecting uncertainty as regards the economic outlook and the sustainability of the current level of some sources of government revenue (notably corporate tax)," it said.
If the bad news for Ireland was slightly slower growth, one of the "risks", the assessment for Italy in the Commission's latest report, was sobering, and paved the way for budget battles with Rome as well as renewed uncertainty over the bloc and stability of the euro.
The Commission expects Italy's deficit to balloon to 3.5% of gross domestic product in 2020 as the euro area's third largest economy grinds out economic growth of just 0.1% this year and 0.7% next year.
forecast growth of the Republic's economy next year, down from an expected 3.7%