Minister for Finance Paschal Donohoe says he expects an additional 50,000 jobs to be created in the Irish economy this year, driving employment to new record level.
Publishing the Government’s latest Stability Programme Update, Mr Donohoe said the labour market was continuing to perform strongly, and was now close to full employment.
“The level of employment is well past its pre-crisis peak and growth of 2.2 and 2.1 per cent is forecast for this year and next [50,000 and 48,000 jobs respectively],” he said.
Nonetheless, the Department of Finance downgraded its growth forecasts for this year and next to 3.9 per cent and 3.3 per cent to reflect what it described as " a deterioration in key export markets".
The department’s latest projections are slightly lower than its autumn forecasts.
“Since the publication of the Department of Finance’s autumn forecasts on budget day, the external environment has become more challenging,” the department said.
“From an Irish perspective the pace of growth has slowed in key export markets, with a loss of momentum particularly evident in both the euro area and the UK.”
The department also highlighted a slowdown in some domestic indicators.
Despite the slowdown it still expects to run a modest budget surplus of 0.2 per cent of gross domestic product (GDP) in 2019 on foot of larger-than-expected corporation tax receipts in the final quarter of last year.
The Government ran a budget surplus last year for the first time in more than a decade thanks in the main to record business tax receipts.
Labour market dividends
Mr Donohoe said the new figures reflected “a more mature rate of growth”.
“We have an economy that is growing at a strong pace but this is a pace of growth that is very different to the rate of growth our economy experienced in the immediate period after the crash,” Mr Donohoe said.
“And the reason for that is across that period we saw a very large amount of unused capacity in our economy which began to be quickly used. That is technical code for more people going back to work, for more homes being built, for infrastructure that was already available being used in a more intense way.
“What we are now seeing is our economy grow at a rate that, if and when we sustain that over time, has the ability to continue to make a really significant difference to the living standards of our citizens, and in turn provide the resources to continue to make progress on the need to invest in homes and in the future of our country.”
On Brexit, he said Ireland could not afford to be "complacent" about the outcome after the UK was given an extension last week until October on its exit date from the EU.
Fiscal defences
“It is absolutely vital that we continue to build up our fiscal defences so that we can continue to support the economy and provide for society, if, and when, these risks materialise.”
The Stability Programme Update reflects the Government’s obligation at an EU level to set out its fiscal and economic projections for the rest of the year.
The latest forecasts were endorsed by the Irish Fiscal Advisory Council.
