The latest forecasts from the Economic and Social Research Institute (ESRI) take a relatively optimistic view of the economic outlook. GDP growth is projected to be a healthy 3.8 per cent this year and 3.6 per cent next year, bringing the unemployment rate down below six per cent in 2018. Consumer spending and investment – particularly in construction – are expected to drive the economy forward.
Though there are obvious dangers to the outlook, it is important to recognise the economic progress of the last few years. Most importantly, the number of people at work continues to show healthy growth.
But as the ESRI acknowledges, there are real dangers ahead from a possible hard Brexit and from threatened changes in US economic policy which could hit trade and foreign direct investment. On the other side of the equation, the institute also cautions that the Government needs to guard against the risk of over-heating, particularly as the construction sector is growing so strongly.
Forecasting against the backdrop of such geo-political and economic uncertainty is very difficult. However the key point is that just because the impact from the move to Brexit and the change in US policy have not yet hit growth, this does not mean they are not big risks. There are always dangers, of course, but the huge difference in the likely economic impact between a hard Brexit and one emerging from more cordial negotiations are becoming ever clearer.
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As the ESRI says, this makes it all the more important to get the economy as strong and resilient as possible. So key policy goals should be stabilising the public finances, improving competitiveness and boosting investment. Although few would argue with these objectives, implementing them requires choices.
There is a window at the moment which must be used to do what is possible to underpin our economic position. If the threatened Brexit storm turns into a less-damaging squall, then all the better.