Irish wages will rise and boost household spending, as employment rises and unemployment falls, the European Commission has forecast.
Its new forecasts are upbeat on the prospects of the Irish economy.
However, it does repeat warning about the potential for the Brexit talks to go badly wrong, as well as the threat if investments by US multinationals were to dry up because of global trade and tax disputes.
Its headline forecasts include unemployment falling to an average rate in 2019 of 4.9% of the labour force — down from the current rate of 5.9% — and the numbers in employment increasing 2.2% this year — up from 1.8% growth in 2017 — and expanding a further 1.8% in 2019.
Ireland’s widely derided headline GDP growth figures will show the economy expanded 5.7% this year, after posting growth of 7.8% last year.
In 2019, the commission believes the economy will expand strongly again, by 4.1%.
Even using the more credible measurements of economic growth that attempt to strip out the huge distortions caused by the tax-driven accounting of multinationals, the economy will be among the fastest growing in Europe in the next two years, according to the commission figures.
Under the modified domestic demand measure, the economy will expand this year and in 2019 by 4%, up from the 3.9% growth rate posted in 2017, its forecasts show.
Rising employment will help drive wage increases, while low inflation, which it sees rising to only 1.1% in 2019, will also help boost consumer spending.
The commission forecasts pay to employees will rise 2.5% this year and by 2.7% in 2019.
The Government will run small annual budget deficits through 2019, while its gross debt will fall to 63.2% of GDP, it said.
On the risks, the commission said: “The uncertainty around Ireland’s economic outlook remains elevated and relates primarily to the outcome of the negotiations between the UK and the EU as well as changes to the international taxation and trade environment.”
“A high degree of unpredictability remains linked to the activities of multinationals, which could drive headline GDP growth in either direction,” it said.