ESRI downgrades house building and domestic growth forecasts
The Economic and Social Research Institute has downgraded its forecast for house building and growth in the domestic economy for this year.
It is the second organisation to reduce its projections after the Central Bank reached a similar conclusion last week.
The ESRI said it expected 33,000 homes to be built this year, which is 1,000 less than it previously forecast.
It would be far short of the Government’s current target of 41,000.
The ESRI warned that house building is continuing to fall short of demand.
It said it reduced its forecast for residential construction due to issues with infrastructure, problems with financing for building and labour shortages.
It said house building in the first three months of this year was weaker than it had expected.
The ESRI also downgraded its growth forecast for the domestic economy for this year from 3% to 2.3%.
It said the general uncertainty and the weaker global outlook is going to affect investment while it also expects consumption to be lower as consumers are more cautious.
It warned the public finances are heavily dependent on windfall corporation tax receipts from multinationals.
ESRI director Alan Barrett said: “While the headline public finance figures appear healthy, the fact that Ireland is running a fiscal deficit (once the headline numbers are corrected for windfall revenues) appears risky.”
Mr Barrett said that the economy continued to perform well and the ongoing increase in the numbers employed was “very welcome”.
He added it was “difficult not be unsettled by global uncertainties”.
The ESRI expects GDP growth, which includes the contribution from multinationals, will be 4.6% this year and 2.9% next year.
It also expects there will be robust growth in exports.
Associate Research Professor at the ESRI Dr Conor O’Toole said that while the domestic economy “appears relatively robust” and is growing “reasonably well”, Ireland relies heavily on the US for trading.
“We’re a small, open economy, we’ve a heavy reliance on the US for trading activity, and there’s just an incredible amount of uncertainty at the moment in the domestic and international economy,” he said.
Speaking on RTÉ’s Morning Ireland, Dr O’Toole said there is a “housing need” of upwards of 50,000 units per year and Ireland is “well shy” of that.
He said there were about 30,000 units last year, which was “disappointing”, and while they were hoping that would come up this year, the “momentum doesn’t appear to be there”.
Trying to unlock growth in housing supply is a “very complicated set of multifaceted factors”, including labour constraints and challenges from infrastructure provision and the planning system, Dr O’Toole added.
“All of these factors interplay with each other and weigh on the outlook and create challenges for the production of housing,” he said.
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