Ibec, the group that represents Irish business, today published its latest Quarterly Economic Outlook (attached), which forecasts growth of 4.8% for 2017, and 3.9% in 2018. This growth is being driven by a buoyant labour market, with figures showing total household disposable income increasing sharply. It warned, however, that the risk of our growth being derailed over the coming years has risen significantly due to external developments. The lack of progress in Brexit negotiations has increased the risk of a no-deal scenario. All forecasts must be seen in that context; the downside risks are increasing.
Ibec's Head of Tax and Fiscal Policy Gerard Brady stated: "The Irish economy continues to perform exceptionally well despite great uncertainty. We expect GDP growth of 4.8% this year and 3.9% for 2018 on the back of a recovering consumer economy and continued strong export growth to the US, EU and developing markets. The consumer economy, in particular, is expected to improve, with household disposable income growing by 5%. With low inflation and 80% of net new jobs being created outside Dublin, households are clearly seeing the benefits of the recovery.
"The Brexit debate in the UK is now mired in divisive domestic politics and the final destination for all involved is an unknown. Whilst our best hope is that economic interests win out in the end, it is far from clear that they will. Diversification by our exporters will be important, but our analysis shows how difficult it may be for sectors most exposed to the UK. At recent rates of new market development it would take five years for the dairy sector and nine years for the meat sector to make up for lost trade with the UK in a hard Brexit scenario. This is before displacement effects on prices are taken into account. Sectors will clearly need more support than was offered in the recent Budget over the coming years.
“Housing is now the major domestic issue for many businesses. The most recent release of stamp duty data suggests in the region of 9,800 new housing units came to market in the last 12 months. This represents a significant pick-up but from a very low base. It is notable, however, that one-third of the units sold over the past twelve months were purchased by buy-to-let or non-household investors. As such, the gap between supply and household demand (estimated to be in the region of 40,000 units annually) will take some time to close yet.”
Key points from the Ibec quarterly assessment include:
Growth: Ibec forecasts GDP growth of 4.8% this year and 3.9% in 2018 driven by a strong domestic economy.
Employment: Will grow by 2.6% in 2017 with unemployment below 6% by the end of the year.
Domestic Economy: Continued improvements in the labour market should see consumer spending rise by 2.8% this year.
Inflation: Is expected to be very modest this year at 0.4% due to a weak sterling and continued strong price competition in retail.
Exports: Exports to the EU, US and developing markets are growing strongly. Exports to grow by over 4% in 2017.
- Ibec Q3 Economic Outlook.pdf - 1,001 Kbytes