Ireland to see second-largest growth in the EU next year

A new forecast says the UK will see the least economic growth

Ireland to see second-largest growth in the EU next year

A view of cranes over a new construction sites in Grand Canal Dock, Dublin | Image: NurPhoto/SIPA USA/PA Images

The European Commission has forecast Ireland's economy will see the second largest growth in the European Union for 2019.

It says the economy is set to grow by 4.5% next year - only Malta will see more growth, at 4.9%.

However some of the larger economies will see significantly less growth again - with Spain, Germany and France seeing growth of 2% and under.

While the United Kingdom will see the least growth of all countries, at just 1.2%.

The commission's Autumn 2018 Economic Forecast also says that this projection is based on current trading relations remaining between the EU and the UK.

Overall, growth in the Euro area is forecast to ease from a 10-year high of 2.4% in 2017 to 2.1% in 2018 - before moderating again to 1.9% in 2019 and 1.7% in 2020.

The same pattern is expected for the EU27, with growth forecast at 2.2% in 2018 and 1.9% in 2020.

The European Commission says last year's "exceptionally benign" global situation helped to underpin strong economic activity and investment in the EU.

"Despite a more uncertain environment, all member states are forecast to continue growing, though at a slower pace, thanks to the strength of domestic consumption and investment.

"Barring major shocks, Europe should be able to sustain above-potential economic growth, robust job creation and falling unemployment.

"However, this baseline scenario is subject to a growing number of interconnected downside risks."

Rising global uncertainty, international trade tensions and higher oil prices will all have a dampening effect on growth.

However unemployment continues to fall.

The commission says: "Labour market conditions continued to improve in the first half of 2018, with employment growth remaining steady even as economic growth cooled.

"Job creation is set to continue to benefit from continued growth and structural reform implementation in some member states.

"Unemployment should continue to fall but at a slower pace than in the past, as employment growth is eventually dampened by increasing labour shortages and slower economic growth."

But the commission adds that many interrelated risks and uncertainty 'cloud the outlook'.

"There is a high degree of uncertainty surrounding the forecast and there are many interconnected downside risks.

"The materialisation of any of these risks could amplify the others and magnify their impact."

It cites overheating in the US, fuelled by pro-cyclical fiscal stimulus, which could lead to interest rates rising faster than expected - and would have negative spillover effects.

While in the EU, it says doubts about the quality and sustainability of public finances in highly indebted member states could spill over to domestic banking sectors, raising financial stability concerns and weighing on economic activity.

And it says risks related to the outcome of the Brexit negotiations also remain.

On this, the commission says: "To allow for a comparison over time, the projections cover all 28 member states, including the United Kingdom.

"Given the ongoing negotiations on the terms of the UK's withdrawal from the EU, our projections are based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the UK."