How is the Irish economy performing?

The current performance of the Irish economy is really strong. If we look under the bonnet of the Irish economy GDP will grow by 5.5% in 2017, while GNP will be up by about 2.6%. Goods exports are up 7%, while core retail sales are up 6.6% this year. Employment figures for 2017 have shown real strength with employment up 3% year on year. This follows on from the 3% growth in jobs last year.

Where are the jobs being created?

Importantly, the Irish economy is seeing broad-based jobs growth across all sectors. And it’s not just Dublin-based jobs growth either. Over half of all recent jobs filled were outside of Dublin. It’s been a remarkable transformation of the Irish economy. Things will moderate in the longer term but it’s been a very strong recovery. The main headwind to the economy is Brexit.

How could Brexit affect the Irish economy?

Brexit is really bad for everyone. There’s no plausible analysis that suggests the UK economy will be better off outside the EU than within it. The harder the Brexit, the more damaging to the Irish economy. We forecast that the outcome of Brexit will be that the Irish economy will grow by 4% less than what it would have had Brexit not occurred.

How is the UK economy performing?

The UK economy has held up better than expected and the UK unemployment rate has continued to fall. It’s at multi-decade lows of 4.25% right now. But the story now is of an economy that has experienced a deceleration in growth. If we go back to the first half of 2016, the UK economy was growing at 1.8% or 1.9%. Now that’s down to 1.5%.

How has Brexit manifested itself in the UK economy?

Brexit has been most visible in the UK currency. We’ve seen sterling move from £0.70 two years ago to £0.93 at one stage. As a result, inflation in the UK has gone from 0% to over 3% today. An inflation spike like that eats into people’s purchasing power. Wages in the UK economy are now falling because of that inflation spike and retail sales growth has weakened from 6% last year to just 1% today.

How structurally damaged is the UK currency?

Currency markets have digested various forms of Brexit risk and we’ve gone through different waves of reaction. There is quite a bit of bad news already in the price. But you can create scenarios where there could be a recovery in sterling. If we got political agreement on a softer Brexit, I think you would see sterling recover. However, the outlook is still very uncertain and sterling remains susceptible to further bouts of acute volatility.