The Central Bank has said that the economy is set for continued strong growth, with no immediate signs of overheating, but has warned the housing crisis will remain a critical issue for some time, writes Geoff Percival.
In its first quarterly bulletin of the year, the Central Bank said that economic recovery has exceeded expectations but growth has come about in a sustainable manner. It has forecast GDP growth of 4.4% for this year — 0.5% higher than its last outlook in October — and has offered 3.9% growth as its first prediction for 2019.
While he didn’t offer a percentage growth figure that would cause worry that the economy could be overheating and losing competitiveness, the Central Bank’s director of economics and statistics Mark Cassidy said any concern would be based more on a large rate of acceleration. Mr Cassidy said housing remains an issue.
While the regulator expects 23,000 houses to be built this year, and that figure to increase to around 27,000 in 2019, he said the supply shortage will persist in the coming years and keep pressurising rents. While an easing in house price and rental cost growth may be seen, pressure on both won’t disappear for the foreseeable future.
He said about 30,000 to 35,000 houses per year are needed to meet long-term demand. The bank said unemployment should hit 5.7% this year and shrink to 5.2% in 2019. While approaching full employment, the bank said there is still sufficient scope for unemployment to fall further before more significant wage pressures emerge.
The Central Bank counts Brexit and global taxation uncertainty as the chief external risks to growth. And, while slowing, it still sees export growth of 4.4% this year. The report chimed with a survey by KBC Bank and Chartered Accountants Ireland which showed business confidence was at its most elevated level for two years. Davy said the upturn here still had some way to go.