Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
PEOPLE LIKE TO have something to look forward to. That’s why, even in the dark days of December, people look forward to ringing in the New Year, full of new possibilities.
They may call economics the ‘dismal science’, but even economists are not immune to looking for silver linings among the winter clouds. So, what’s in store for the Irish economy in 2018, I hear you ask?
Growth forecast
The latest data from the CSO number crunchers suggest an economy in rude health. The official numbers suggest the economy, as measured by GDP, was more than 10% larger in the three months to end-September than a year earlier, and up more than 60% from the mid-crisis low recorded in early 2013.
True, these eye-watering numbers owe much to the distortions caused by multinational activity, dubbed ‘Leprechaun economics’ by some. But, even the least distorted element of GDP, personal consumption, is up 2.8% on a year earlier, and 14.3% since the first three months of 2013.
Just last month, the European Commission upgraded its growth forecast for Ireland and the EU as a whole. Even though Irish GDP is projected to slow slightly, from 4.8% this year to a still-healthy 3.9% in 2018, this is still enough to see Ireland retain third place in the growth league table, behind only Malta and Romania.
Ireland’s growth rates this year and next are expected to be about double the rates in Germany and three times the rates in the Brexit-stricken UK.
As a small, open, trading nation, we are benefitting from the most sustained and synchronised expansion in the global economy in a decade, with all major regions growing simultaneously and relatively strongly. The OECD recently revised upwards its global GDP growth forecasts to 3.6% in 2017 and 3.7% in 2018.
Of course, you can’t eat GDP. So, what does it all mean for you and me?
More people back at work
The Irish economy is generating more than 1,000 full-time jobs every week, while people are increasingly moving from part-time to full-time work. Unemployment is on course to fall towards 5% by the end of 2018, levels not seen since 2007.
After half a decade of stagnation, wage growth is starting to show signs of life, with hourly earnings up 2.2% in the past year and the ESRI predicting they will increase by 3% in 2018. Average weekly earnings have barely moved since early 2016, while hourly earnings have actually fallen slightly.
Given this relatively rosy picture, it doesn’t come as much surprise that inflation has turned a corner too. Having been falling until the middle of this year, there are early signs that consumer prices are starting to pick up, with inflation expected to accelerate through 2018.
Tax changes and the 30 cent an hour increase in the minimum wage, both announced in October’s budget, should provide a further modest but welcome boost to pay packets when they kick in in January. In such an environment, it won’t come as any surprise if the coming months see consumer confidence surpass the post-crisis high set in February 2016 to reach levels not seen since 2006.
Risks over the horizon
The government’s much-needed plan to hike capital spending is likely to further boost the economy over the coming years, while ensuring infrastructure is in place to support growth over the longer term.
An extra €790m capital spend was allocated for 2018, bringing the total to €5.3bn for the year, a stepping stone towards the €7.8bn foreseen annually by 2021. About a third of the 2018 capital spend, or €1.8bn, will be dedicated to housing, funding the construction of 3,800 social homes.
Even if the number of houses being constructed is already starting to pick up, it is a drop in the ocean compared to the number needed to provide for new households, let alone clear the backlog of recent years and truly address the housing crisis.
But, as the ESRI and others have pointed out, the expected normalisation of housebuilding could cause the economy to overheat just as it approaches what economists call ‘full employment’. As Ireland learned in the early years of the 21st century, an overheating economy can feel great at the time, but it stores up problems for the future.
The elephant stomping around the room
Without doubt, Brexit is the elephant stomping around the room. Already, the UK’s economy has slowed and sterling has weakened, hurting Irish exporters. Things could get infinitely worse if the negotiations go pear-shaped during 2018, resulting in a ‘hard Brexit’ and new tariffs on our trade with Britain.
Recent research has shown that Ireland is the country with most to lose from Brexit under any scenario; even more than the UK itself. But, Irish job losses could reach 50,000 (about 1 in 40 jobs in the country) in the event of a ‘hard Brexit’ in early 2019, nearly 5 times worse than a ‘soft Brexit’ scenario.
Another fly in the ointment is the tax reform package passed in the US this week, which will see their corporation tax rate reduced from 35% to 21% from 2018 onwards.
Other changes included a 15.5% amnesty rate at which US multinationals can repatriate historical profits and a move towards a ‘territorial’ tax system whereby global profits of US multinationals will be exempt from US taxes going forward. The aim of these reforms is to bring jobs and investment back to US, meaning places like Ireland could lose out in the future.
Apple Inc alone is reported to be in line to gain $47bn from the amnesty, given that it maintains a cash mountain of over $200bn in Ireland and other jurisdictions.
Things likely to get a bit better
These tax changes will take time to feed through to multinationals’ investment decisions, and may not in any case lead to the scale of ‘re-shoring’ of jobs to the US that has been hoped for (or feared, from an Irish vantage point). So, the impact in 2018 may be rather limited, but can expect to be felt from 2019 onwards.
Other headwinds from the US include further interest rate hikes, although in Europe the ECB has signaled its intention to keep printing money until at least next September, while any interest rate rises would be even further in the future.
But, none of Brexit, US tax changes, ECB interest rate rises or the fallout from an overheating economy are expected to weigh heavily on Ireland in 2018. Even buoyant financial markets look set to continue defying economic gravity in the short term. Our national economic wellbeing may be haunted by the ghost of Christmas Past, and fearful of the ghost of Christmas Yet to Come.
But, for most of us, we can rejoice with the ghost of Christmas Present safe in the knowledge that things are likely to get better, before they get worse.
Victor Duggan is an economist and public policy expert, having worked in the OECD, World Bank, European Commission, European Investment Fund and the Irish Labour Party, as well as in the private sector.
To embed this post, copy the code below on your site
Not my bag musically but fair play for shaking a leg and making a big effort on this front.
No doubt we’ll have the usual eejits along calling it woke zzzzzzzz.
They’d prefer to be downing pints of petrol as the fire approaches just to stick it to anyone who shows the vaguest amount of concern about wrecking our one and only gaff.
@SerotoninWars: the kinetic dancefloor is probably better for publicity than it is for electricity generation. In 3 hours one of the dance floors is only able to generate enough to power a kettle for 1 hour. I doubt the bikes are much use either, good for raising awareness but not much else. I’d imagine the extra c02 of moving these from venue to venue is probably more than is saved by them.
@SerotoninWars: I’d be kineticing the opposite direction personally, but they’re big into being environmentally aware so let em have at it.
@John K: Way to go picking one aspect and ignoring the rest. Also, read the article. I get why people love to attack and dismiss anyone making an effort. It means they can make lazy excuses for doing nothing themselves. Back to the inertia and status quo which requires zero effort. It’s comforting and easy but ignores the facts. Same as usual.
@ecrowley ecrowley: Same. Not a fan of their music at all but they’re huge, play to millions and get the press and column inches, so it’s good to see them making an effort. The music touring industry needs as many acts as possible shaking a leg to find ways of making their shows less of a disaster resource-wise and environmentally.
@SerotoninWars: wasn’t meant as an attack. Instead of saying publicity I should have said raising awareness. Their other efforts are laudable. I myself have recently spent a significant amount between air to water heating, mechanical heat recovery and a solar pv system with battery so dont appreciatethe ad hominum attack. My point was that the dance floors and bikes are probably a net negative to the environment and counter productive to their aim.
@SerotoninWars:
People if they want can give the middle finger to anything. If they didn’t the only art we would have would have would be this mediocre pish!
@John K: Apologies. I was a bit OTT in my reply! You get so used to people replying with the sole aim of undermining any efforts on this front. There’s so much misinformation and commentary with the aim of spurring people to inaction and apathy. It wears you out after a while! But you gotta remember everyone isn’t coming at it from a Trumpian/MAGA/Brit Gutter Press angle! So my bad!
That’s fair enough if you are suspect about that one aspect. I was taking it as one part of a larger effort, and powering one of the smaller stages seemed a decent return, when added to all of the other efforts. Of course more can be done and I’m sure if there’s a will the technology and systems can be streamlined to be even more effective :)
@Clash: They can indeed! It just feels like good righteous anger, punching up, has been replaced with a lot of silly self-defeating contrarianism! No facts. Just hunches and tantrums based on people’s aversion to change or making even a tiny bit of an effort! I’d much rather see The Clash than Coldplay. Although that might open up another jaded debate about whether they were really punk and we’ve enough cobwebbed arguments already this week with Oasis back!
@SerotoninWars: make a lot of money/worry about it later
Codswallop.
So,is everyone going to walk to the concerts?
@IMHO: You’re thinking of The Proclaimers – I’m Gonna Be (500 Miles)
@IMHO: if you read the full article towards the end they said attendees travel is not included.
What a load of xxxx!!
@Ooooooooooo: xxxx? I’m guessing either Castlemaine or Hamster.
Give me strength.
Gimmicks and Tomfoolery.
Apart from the planting of trees, the rest of that is pure spoofery.
If the really wanted to make a direct impact in reducing their carbon footprint, rather than just paying lipservice to it, then they wouldn’t hold the concerts.
But then they wouldn’t get paid, and playing concerts and selling merchandise at those concerts is a major revenue source for bands and artists.
@Dvsespaña: I think you have nailed it and may I add that if the cut their costs by 50% will their ticket prices also get cut by 50%, I doubt it but they have made enough money to live on for a few lifetimes maybe a lot less concerts is the answer. Maybe multiple hit and run concerts in small venues like Prince did in 2013 is a better solution?
Well its nice to see some millionaires doing something positive, normally there getting rescued from yachts/powerboats or crashing planes/helicopters. Fair play.
They say that music can move people;
This is certainly true when it comes to Coldplay.
I always leave the room when I hear them.
They got the toilets on the upper stands connected to a mini hydro electric power station, so the flow is generating power on the way to the sewer, so drink up and pee
@P. V. Aglue: pity he broke up with Gwyneth Paltrow, apparently she produces enough BS that the methane harvested from it can power a medium sized town.
And not a word about the poor neighbors and what we have to put up with crowds piling into the area our car parks nicked and people pissing in our gardans all coz of crokers concerts we re locked in our homes 4 the duration of theses concerts croker is now too big for the area and needs to be housed elsewhere preferably where they wanted to build that new super prison laying idol @ taxpayers expence
@liam ward: Funny .. It’s always the residents over by Croker moaning.. Don’t hear the residents around the Aviva or RDS moaning on like this.. you knew the stadium was there when you bought your house I assume.. or else the estate agent was David Copperfield… ?
@Brian: A lot of old family homes around Croke Park. Perhaps the poster was born and grew up there.
Ever think of that before posting what you probably consider a “ witty “ comment ? .
@Danny Reilly: then he should be used to it?
@Fergus O’Donnell: Speak for yourself but im not sure how long it takes to “ get used to “ watching people pissin in your front garden. Perhaps it’s something you could get used to.
Delusional fools
Hey hey my my
@Dave c: Rock and roll is here to sty?
What a load of nonsense
They should check out an Irish company called Neg8 while they’re here. If they’re serious.
Imagine Oasis having a kinetic stage . That kettle for the back stage brew would be leave it decidedly tepid
have your say