Central Bank: Main risks to Ireland's positive economic outlook come from abroad

The potential for shocks from abroad remain the biggest risks to the continuing good economic outlook for the Irish economy.

The Central Bank said disappointing external demand, particularly from China, could in time indirectly affect Ireland by bear down on the economies that the country does most trade with. 

The increasing of interest rates for almost a decade in the US was also a risk, it said.

Stock markets have slumped in the first few weeks of the year as growing uncertainty the world can continue to grow if the Chinese economy — a huge consumer of energy and raw materials — slows dramatically in the year ahead. 

A crisis that could deepen across emerging markets could be sparked by further depreciations in the Chinese currency, investors fear.

That in turn could deepen the financial turmoil and spell financial trouble ahead for many firms in developed economies.

However, the Central Bank projects the Irish economy will continue to be supported by low crude oil prices and the weakened euro.

“Our central assumption is Irish export growth will respond more in line with trading partner demand by 2017, with goods exports growing at a faster pace than services over the forecast horizon,” said the report.

Total exports it said climbed 12.5% — in volume terms — last year. 

Total exports this year will reach over €276 billion, a 6.5% increase in volume terms, it forecasts. 

Exports will then grow 4.9% in 2017.

“Goods exports have been the main contributor to overall export growth in recent quarters, reflecting both activity within the State and production carried out on contract for Irish resident companies outside the State,” the Central Bank said.

And the good exports run is not going to end any time soon. The evidence of surveys and ECB forecasts suggest demand from Ireland’s main trading partners will remain firm.

“Looking forward, the relatively favourable outlook for external factors, such as the cost of energy and exchange rate competitiveness, combined with favourable firm and sector-specific developments are likely to support continued robust in exports over the forecast horizon,” it said.


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