The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

Economic Eye
Winter forecast
2019

Executive summary

It is a peculiar time for the all-island economy. On the brink of Brexit, and against a backdrop of increased anxiety over global growth, both jurisdictions continue to enjoy strong levels of job creation, and a need for more talent is the most frequent business message.

Growth forecasts

EY growth forecasts
2018 2019 2020 2021 2022 2023
ROI 8.3% 3.9% 3.2% 3.0% 3.1% 3.1%
ROI
MDD*
4.2% 3.7% 3.5% 3.2% 3.0% 2.8%
NI 1.5% 0.9% 1.2% 1.5% 1.9% 2.0%
UK 1.4% 1.5% 1.7% 1.8% 2.0% 2.1%

Source: EY Economic Eye, UK ITEM Club

*Modified domestic demand removes the impacts of IP relocation and aircraft leasing, giving a more accurate picture of the domestic economy.

The consensus across the island is that Brexit has not yet had a significant impact on growth in 2018. Our latest Economic Eye forecasts are modestly revised from our November update, with an uptick in 2018 growth across both jurisdictions, and a very slight downward reduction in growth expectations in 2019 and 2020 for the Republic of Ireland (ROI). This reflects a weaker global growth outlook.


Republic of Ireland

ROI is facing into Brexit headwinds on a strong foundation as GDP growth figures continue to impress. Removing the effects of IP relocation and aircraft leasing, Modified Domestic Demand (MDD) is predicted to be 4.2% for the domestic economy in 2018 and 3.7% in 2019. This resilient economic performance reflects a strength in the domestic economy and healthier public finances, which complement the global sector.


Northern Ireland

NI is expected to have grown modestly ahead of the UK in 2018, at 1.5%, based on available labour market data. It is expected to experience much slower growth of under 1% in 2019. Brexit appears to have had limited impact on the overall economy to date, though 2019 is a much more unpredictable picture, with Brexit likely to have a more noticeable impact on the headline figures.

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Scenarios reveal the scale of risk

Brexit scenario analysis carried out using the Economic Eye model reveals the scale of downside risk, with NI particularly vulnerable given its lower base growth. Domestic strength provides insulation for ROI, but in the event of a fractious no-deal, the possibility of recession in NI cannot be discounted. The results of the exercise produce a recession in NI and a marked slowdown in ROI. Collectively, GDP is 3.0% lower across the island in 2020.


Constructing the future

In the first in a series of themed chapters looking at key issues for the island’s economic future, Annette Hughes, Irish member of the Euroconstruct network and Director in our EY-DKM team, takes an in-depth look at the construction sector. The need for sustained infrastructure investment across the island and an enhanced policy focus on the construction sector is considered.

Download the full report for detailed forecasts and further analysis of Brexit, the construction sector, as well as key risks and opportunities as identified by our clients.