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Irish GDP has outperformed everywhere else in
the EU each year since 2014 and the economy has so far largely
brushed off uncertainties arising from Britain's 2016 vote to
leave the EU, which the government warns could lead to a sudden
contraction if Ireland's nearest neighbor departs without a
deal.
The growing risk prompted Finance Minister Paschal Donohoe to
base next month's budget for 2020 on the assumption of a no-deal
Brexit, setting aside funds for vulnerable sectors and allowing
the state's finances to return to deficit.
"Overall growth in the economy continues to be broad-based, with
positive contributions from the domestic and multinational
sectors. Early indications suggest solid growth in the third
quarter as well," Donohoe said in a statement on Friday.
"Against this, there is a continued softness in the
international environment, particularly in the manufacturing
sectors. The risk of a no-deal Brexit hangs over the economy,
with business and consumer confidence softening as a result."
The Central Statistics Office (CSO) said GDP was growing at a
rate of 6.6% halfway through the year after quarterly growth for
the first three months of the year was revised up a touch to
2.7% with the annual figure amended to 7.4% from 6.3%.
Donohoe's department forecast in April that GDP would grow by
3.9% this year and that the economy could either flatline next
year with a "no deal" Brexit, or grow by 3.3% if there is an
orderly withdrawal.
The relevance of using GDP diminished when 2015 growth was
adjusted up to 26% after a massive revision to the stock of
capital assets related to Ireland's large cluster of
multinational companies.
Such distortions have also inflated growth in subsequent years,
prompting the CSO to phase in new data that strip out some
globalised activities and which Donohoe said showed growth in
the domestic economy moderating to more sustainable levels
One such measure, modified total domestic demand rose by 1.9% on
the quarter.
Many economists also prefer to use a labor market close to
capacity with an unemployment rate of 5.2% to most accurately
assess how Ireland's open economy is doing.
"As we look at the first half of the year, we can see that most
engines of growth are still incredibly strong. But if we look
forward, clearly we can see the clouds gathering and we can see
slowing momentum as we look forward," said Irish Business and
Employers Confederation policy chief Fergal O'Brien.
"The rearview mirror is still a Brexit-free zone, it's the
windscreen I'm worried about."
(Reporting by Padraic Halpin; Editing by Catherine Evans and
Giles Elgood)
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