Brexit poses the biggest risk to the Irish economy, according to the trade union-backed Nevin Economic Research Institute (NERI). But its Quarterly Economic Observer also warns that economic ‘overheating’ is a major risk in the Republic.

Overheating occurs when an economy is expanding at an unsustainable rate, with inflation growing as output fails to keep pace with demand.

The Quarterly Observer is NERI’s economic outlook for both the Republic of Ireland and Northern Ireland. The summer issue says there is enough ‘fiscal space’ – or available public funding – to introduce stabilising measures in the event of a no-deal Brexit without compromising the medium-term budgetary position.

It also proposes changes to tax policy in the Republic, including minor reforms to the local property tax.

NERI projects real GDP growth of 4.6% in the Republic this year, and 3.3% in 2020, assuming there is a soft Brexit. The body is less optimistic about Northern Irish economic performance, citing its particular vulnerability to a no-deal Brexit.

The economists envisage average real growth of 2% in wages in 2019-2020, and says a tightening labour market should increase the bargaining power of workers.

They say labour market conditions are improving in the short run, with an additional 70,000 people set to enter employment this year.

The report is available HERE.