CEO Update: New Ibec Economic Outlook forecasts the economy entering period of slowdown increasing businesses risk to cost exposure
Earlier today, Ibec published our quarterly economic outlook providing an in-depth analysis of the Irish economy.
The analysis forecasts volume growth in domestic demand of 2.3% in 2024 and 3% in 2025.
We believe we are now entering a period of slower growth and business consolidation following a period of unprecedented expansion for the Irish export base and labour market.
This change in trend has been driven by global economic conditions and is reflected in falling goods exports down 6% and slowing investment down 4% year to date in 2023.
It is important to keep in mind that since 2019, the Irish economy has been exceptional amongst developed economies in terms of enormous growth in both exports and large-scale investments. This has culminated in the creation of 350,000 jobs, the strongest period of employment growth in the history of the State.
However, the softening global picture will have an impact on the economy and is already being reflected in growing concern amongst Ibec members about competitiveness.
Falling goods exports and slowing investment levels are two symptoms of the global slowdown which will persist in 2024. The full squeeze of higher interest rates on consumers and businesses is also yet to be absorbed.
We are now entering a period of consolidation where those gains are not reversed but businesses will have a much greater focus on competitiveness.
In this context, the decision of the Government to place substantial costs through labour market taxes, entitlements and regulations over the coming years without any overarching strategy or consideration of the cumulative cost remains a major concern.
This will result in cumulative increases in labour costs of more than 25% in many heavily impacted firms over the next two years alone. Even where individual measures make sense, like pension auto-enrolment or pay-linked unemployment benefits, the lack of coordination across Government has meant a raft of new measures arriving all at once.
Whilst Budget 2024 saw the announcement of a €250 million fund as a partial recognition of these additional costs, it will be spread far too thinly across the economy and doesn’t come close to offsetting the cumulative costs involved.
These Government imposed costs will add more than €4 billion annually to employment costs, over and above normal wage trends, when implemented. This is before knock-on relativity pay claims or administrative costs are accounted for.
Ibec will be raising these issues today at a political briefing with TDs and Senators and in the days and weeks ahead across the organisation.
You can read the full Economic Outlook report on our website here.
Additionally, in the latest episode of our podcast Ibec Responds, Ibec Executive Director of Lobbying and Influence, Fergal O’Brien, joins Ibec Chief Economist, Gerard Brady, to discuss key findings from our Economic Outlook.
Ibec Responds is available to stream on all podcast platforms and on our website.