OECD: Rising property prices and 'disorderly Brexit' could push Ireland into recession
The Organisation for Economic Co-operation and Development (OECD) has warned a disorderly Brexit “could plunge the Irish economy into a recession” and that further surges in Irish property prices could lead to another boom-to-bust cycle.
The latest economic outlook suggests the the influx of foreign investors, who are responsible for around half the investment in the commercial property market, could create a new source of risk and the market is "vulnerable to rapid changes in prices".
It says residential and commercial prices are still high, despite growth rates having moderated.
“Property prices may strongly surge again, which would further boost construction activity in the near term but may lay the foundation for another boom-and-bust cycle if associated with another surge in credit growth,” the OECD says.
It says a shortage in housing stock will continue for some time.
Although new housing completions have been catching up with demand, there will continue to be shortages in the dwelling stock for some time.
In addition, a disorderly Brexit “could plunge the Irish economy into a recession”.
The OECD expects significant wage pressure in the future as the unemployment rate falls to historically very low levels.
"The unemployment rate will continue to fall to historically very low levels, albeit at a more moderate pace. As a result, wage pressures will remain significant, translating into higher prices given weak productivity growth."
Economic growth is expected to ease gradually to 3.9% in 2019 and 3.3% in 2020.
The OECD suggests the Government should focus on sustainability in the public finances and says local property tax should rise along with house prices.
Globally, the OECD says world trade is projected to grow by just over 2% this year, the lowest rate in a decade. It says the current cycle of trade disputes is hurting manufacturing, disrupting global value chains and generating significant uncertainty.
“The fragile global economy is being destabilised by trade tensions,” said OECD Chief Economist Laurence Boone.
“Growth is stabilising but the economy is weak and there are very serious risks on the horizon. Governments need to work harder together to ensure a return to stronger and more sustainable growth.”
