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Economy operating close to full capacity – Central Bank

The Central Bank has said the economy is close to operating at full capacity and that any incoming government should follow a prudent fiscal policy and reduce the level of national debt.

In its Quarterly Bulletin, the bank also highlights how exports of Irish goods are becoming increasingly concentrated in pharmaceuticals and computer processors.

The economy has been given a breather.

The revised Withdrawal Agreement struck between the UK and the EU will ensure the economy will continue to grow strongly this year at a rate of 4.8%.

But after that, the bank forecasts the economy will take a hit depending on the scope of the future trade deal with the UK.

The bank has also published research which finds that 62% of Irish goods exports are concentrated in pharmaceuticals and that 40% of the growth in this sector can be accounted for by just one product category: immunology drugs.

Without this sector, growth in overall merchandise exports last year would have been flat.

Speaking at a briefing, the Bank’s Director of Economics and Statistics Mark Cassidy said the bank’s economic advice to any incoming government would be the same as it gave to the outgoing administration: – follow a prudent fiscal policy and reduce the level of public debt.

The Central Bank also revised up its forecast for gross domestic product growth for 2019, expecting data to confirm that the economy grew by 6.1% last year, above the 5% it had forecast in October. 

Expectations for GDP growth in 2020 and 2021 were also revised upwards to 4.8% and 4.2% compared to forecasts of 4.3% for 2020 and 3.9% for 2021 three months ago.

It said last year’s expansion was driven by exceptionally strong growth in the exports of pharmaceuticals and chemicals, which the bank expects to continue, masking slower growth in other export sectors experiencing relatively weak demand.

The forecasts are based on an assumption that a new post-Brexit EU-UK trade agreement is in place from January 2021.

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