Ireland tops growth predictions - A cautious celebration

The European Commission has forecast that our economy will top the EU growth table this year and that spectacular growth will continue next year.

The EC believes Ireland will record GDP growth of 5.6% for 2018 and 4% for next year. This is welcome news, but it is not without consequences and celebrations must be tempered with reality.

It will inevitably increase pressure on the Government, especially one contemplating an election, to introduce tax cuts for no reason other than the crop looks well in the field. If realised, the growth may stir inflation and, in time, lead to a need for pay increases. The responses to that need, as government after government has shown, are not always even and can exacerbate social division. It would be cheering to be able to use that great phrase about economies — “it’s different this time” — but that might show misplaced optimism.

Tellingly, and most importantly, the EC warns that this is a small, open economy, and even if domestic demand will be the main driver over the next two years, we remain exposed to changes in the international taxation and trade environments. The prediction also carries a sobering caveat: “Activities of multinational companies could swing headline GDP growth in either direction.”

Despite those very real concerns, these figures are something to cheer, as, without growth, our response to so many social problems will remain inadequate.