Think tank predicts strong economic growth next year

The ESRI says we will effectively have 'full employment' by the end of 2018.

Think tank predicts strong economic growth next year

Picture by: Nicolas Armer/DPA/PA Images

The economy's set to continue growing strongly next year - with ‘full employment’ expected by the end of 2018 according to leading think tank.

In its latest report, the Economic and Social Research Institute (ESRI) has said the economy will have grown by 5% by the end of the year and is likely to post growth of 4.2% next year.

The report says we will effectively have 'full employment' by the end of 2018.

“Full" employment is often defined as the point at which unemployment levels reach 5% and below.

In its report, the ESRI said that the Irish economy performed strongly in 2017 – mainly as a result of domestic factors.

It found that wage growth has intensified – rising four times faster between June 2016 and 2017 than it did in the same period the year before.

It has predicted that wages will continue rising, as unemployment falls.

However, the body is warning the government against big spending increases - which could overheat the economy.

Report author Professor Kieran McQuinn said there is a possible down side to rapid growth:

“Our main kind of concern as far as domestic risks are concerned is that we feel policy makers in particular – in terms of the way in which fiscal policy is conducted – will have to be very careful next year to ensure that the economy does not actually overheat and that we don’t end up having too much activity.”

Key risks to the outlook in the near to medium term include Brexit and the “increasingly apparent” slow-down in the UK economy.

Mr McQuinn said the falling growth across the water is a real risk:

“In particular the very low rate of productivity growth in the UK economy is set to impact on growth prospects there,” he said.

“So that is a concern for the Irish economy. We still have a lot of businesses in the Irish economy that export to the UK.”

The improvement in household balance sheets, alongside falling unemployment figures, is expected to support solid growth in consumer behaviour.

Researchers warned that the Government should prioritise reducing public and private debt before the cost of borrowing rises.