Central Bank reduces forecast for economic growth due to rising uncertainty
The Central Bank has reduced its forecast for economic growth for this year due to rising uncertainty caused by the trade war between the US and EU.
It says the domestic economy will grow by 2.7% which is 0.5% lower than its last projection.
The bank also said fewer homes will be built over the next two years than it had forecast earlier, due to a fall in residential construction last year.
It now says there will be 35,000 houses and apartments built this year, rising to 40,000 next year and 44,000 in 2027.
Last year the bank said 70,000 homes need to be built annually over the next ten years to deal with housing shortfall and population growth.
In 2024 just over 30,000 houses and apartments were completed.
In its latest economic bulletin the Central Bank said: “Several factors are restraining housing supply including low productivity in the construction sector, delays in utility connection, delays in planning system and a shortage of zoned and serviced land in high-demand areas.”
The bank said the economy is continuing to perform well.
But it added: “Risks to the growth outlook remain firmly on the downside as the risk of more pronounced global tensions have risen.”
“As a small open economy with extensive trade and foreign direct investment linkages with the US, the Irish economy, public finances and labour market are highly exposed to changes in US economic policy and any broader deterioration in the global trading environment,” it said.
The bank said that potentially €15 billion of corporation tax receipts collected from multinationals were “at risk” due to tariffs threatened by the US.
It added that this could result in a “fiscal shock” which could impact the public finances and result in changes to taxation and spending by the Government.
While the bank trimmed its forecast for economic growth, it noted that the level of uncertainty was less than during the Covid-19 pandemic or Brexit.
The bank has also increased its forecast for inflation for this year by 0.5% to 2.2% due to higher energy prices and more persistent services inflation.
Article Source – Central Bank reduces forecast for economic growth due to rising uncertainty – RTE
