Irish central bank warns of external risks to local economy

Despite improved conditions over Ireland's macro-financial environment, the Central Bank of Ireland on Tuesday warned of external risks to local economy.

In its latest macro-financial review of the Irish economy, the central bank said Ireland's real gross domestic product (GDP) is projected to grow by 5.1 percent in 2016 and by 4.2 percent in 2017, with increases in consumption, investment and net exports contributing.

But it said risks to the domestic economic outlook over this forecast horizon are "weighted to the downside, stemming mostly from the external economic environment".

It added external factors like the forthcoming referendum on Britain's membership of European Union and geopolitical tensions are all risks that lead to uncertainty.

Britain will hold a referendum on June 23 to decide whether it should remain in the EU.

"Geopolitical tensions, the migrant crisis in Europe, and the outcome of the referendum on whether the UK should remain in the EU are among the factors influencing economic uncertainty at this time," the report said.

The central bank said Brexit would have both short-term and long-term impacts on Ireland, adding that a negative impact on Irish exports to Britain could be expected.

It said household debt, while declining, remains high, leaving households vulnerable to adverse movements in income or interest rates.

It also said the general government gross debt-to-GDP ratio remains high, leaving the public finances vulnerable to economic and financial shocks, stressing that maintaining fiscal discipline is necessary to keep the public finances on a sustainable path. Endit