An increase in general government spending is more concerning than the argument about how to treat corporation tax receipts, according to EY's chief economist.

Neil Gibson said keeping control of the public pay bill, while managing to ensure enough people are hired, but keeping general costs down was one of the 'great challenges' facing the government.

"When the economy is doing well, there's a huge list of people at the door looking for money," he said.

EY slightly upgraded its growth outlook for the Irish economy for this year on the back of better than expected corporate tax receipts and a stronger labour market since the start of the year.

On the debate as to whether the Government should put a portion of corporate tax receipts aside, Neil Gibson said the game of catch up that ensued as the economy recovered in the past decade made it very difficult to stick to traditional economic models.


"The right economic answer is to spend when times are tough and ease back when the economy is growing strongly. Over the last decade, we were unable to spend. We've a huge infrastructure and public service backlog so that makes it incredibly difficult to follow good economic practice," he explained.

"It requires really careful prioritisation of what are the most critical projects to facilitate this large level of growth," he added.

On the Northern Ireland economy, EY is forecasting growth of just above 1% this year.

"At the headline level, you'd think it was night and day between the two economies. On the ground, however, it doesn't feel very different. Both have strong labour markets."

He said businesses on both sides were asking the same questions around sourcing talent and investing in new ways of doing things.

However, pay pressures in Northern Ireland are not as acute.

Professor Gibson said the EY forecasts were contingent on a Brexit deal being struck.

"Our forecasts suggests Ireland is probably strong enough to avoid outright recession in the case of a hard Brexit. That's no comfort to sectors that would face particular hardship. 

"Ireland is getting some upsides, such as a relocation from London. FDI numbers are up again which shows that, even if it's tough, there would be some offsetting effects that would give the exchequer some money to offset difficult areas."