THE latest ESRI medium-term outlook for the Irish economy is both reassuring and worrying.
Reassuring because it points to a sustainable long-term growth rate of 3%, a return to net immigration, and unemployment falling to 6%, a figure close to the magical 4% which economists regard as representing full employment.
Worrying because, while the report forecasts certain benefits for the Irish economy arising from Brexit and the prospect that Ireland might see a substantial relocation of foreign direct investment from the UK, this is subject to global demand being sustained and so is tenuous at best.
Equally unnerving is the ESRI’s examination of the EU Commission’s proposed Common Consolidated Corporate Tax Base. It represents a major change in EU-wide tax rules that could devastate small, open economies like Ireland that have an over-dependence on foreign direct investment.
It would not directly increase Ireland’s low corporation tax but would make it less attractive as it would apply to a smaller proportion of a multinational company’s income.
The research also offers a sobering assessment of likely future demand for housing, increasing from 23,000 units a year to just over 30,000 in 2024. This is likely to pose a huge challenge for banks and those saving to buy their own homes.
While the report is hardly pessimistic, it is sobering and economists, politicians, and the wider public should note it.
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