Figures from the Central Statistics Office yesterday showed that the economy grew by 7.2% of GDP last year, but while the figures were positive, the IMF has warned of the potential risks to economic growth from Brexit.

Dermot O'Leary, chief economist with Goodbody, said Ireland is not an economy that is growing by 9% in the first quarter of the year as the headline GDP numbers would suggest.

But he said that if you look at the domestic spending elements of the Irish economy - including consumer spending, business spending, construction spending, and government spending - the economy is growing by close to 5%. Mr O'Leary said in an European context, that is extremely positive. 

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The economist acknowledged that the country cannot be complacent about warning signals such as the latest from the IMF.  There were two very clear external risks at the start of the year. One was the risk of US corporate tax reform impacting on strong flows of Foreign Direct Investment into Ireland, and that has played a huge role over the last number of years in the expansion. 

"What we've seen in the first half of the year is that doesn't seem to be coming through in terms of the negative effect," Mr O'Leary said. "Not to be complacent about it and it is early days, but it's ok so far."

He said the IMF report is saying that the economy would be impacted by 4% of GDP over the medium term, up to 2030, if a hard Brexit comes. But he said the IMF's modelling does not look at the potential positive impact of relocations from the UK into Ireland as a result of Brexit and so it is looking at the negative effect."

Mr O'Leary acknowledged that Ireland should not get complacent about its debt levels. "That said debt to GDP is pretty low in the European context. It's below 70%.  But looking at a proper indicator like the adjusted GNI star variable, Ireland is a very high debt economy."

He said he would be more concerned from the point of public finances as to overheating, and the effect that the Government may have on that. "From that perspective as well as from the perspective of Brexit, we need to be careful about public spending over the next 12 to 18 months, and focus on the supply side of the economy. He said the focus needs to be on increasing the supply capacity of the Irish economy -  like infrastructure and housing - rather than pumping up the economy even more and increasing current spending.

Asked if the economy is overheating, Mr O'Leary said, "I don't think we are there just yet, but we are very, very close." He said the numbers to look at are very clearly in terms of the labour market. There has been a broad based increase in earnings, and that, Mr O'Leary noted, is the real sign as unemployment gets into territory that we have not seen in over a decade

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