New government to tap 'strong growth bounty' after election

New government to tap 'strong growth bounty' after election

A new government after the election is likely to have access to a bounty of rising revenues as the Brexit clouds lift, new forecasts from broker Davy suggest. 

Its chief economist Conall Mac Coille significantly raised his GDP growth forecasts for 2019 to 6.2% from 5% in an earlier forecast, and projects growth of 5.5% this year, up from over 4% previously. 

Last week, Finance Minister Paschal Donohoe (pictured) said the economy will grow 3.9% this year, as long as the Brexit concerns do not return.

Mr Mac Coille forecasts the Government's budget surplus will increase by €1bn this year from 2019, as the indigenous economy shakes off the dampening effects of Brexit.

Employment will grow by 2% and unemployment fall to 4.4% this year, according to the forecasts. Davy also projects house prices will rise 2%, but the number of new homes, at 25,000, will again fall far short of the numbers required to meet demand. 

Meanwhile, lessening fears over Brexit's damaging effects on the economy helped the construction industry expand output in December, according to the latest Ulster Bank survey of purchasing managers. 

After a run of three months when output contracted, the index rebounded to post a reading of 52. That's above the 50 level which marks the divide between contraction and expansion.

Two of the main components of the index, housing and commercial activity, expanded in the month, but civil engineering continued to contract. 

The purchasing managers were also confident about future output, helping recruitment of new construction workers to rise to a six-month high in December.

Building input prices fell back in the month although suppliers increased prices for oil, insulation products, and steel.

"The future activity index rose to a six-month high in December, as confidence about the sector’s future prospects is being underpinned by expectations for availability of new projects in early 2020, while reduced uncertainty around Brexit was also cited as a source of support for the outlook," chief economist at Ulster Bank in the Republic, Simon Barry said.

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