Future growth slows on capacity constraints
Ibec, the group that represents Irish business, today published its new Quarterly Economic Outlook Q4 2019, which forecasts GDP growth of 3.1% in 2020. The Outlook says that while the Irish economy has experienced several years of strong growth, significant capacity constraints right across the economy are now impacting companies’ enlargement plans and limiting the potential for economic expansion. As a result, we are likely to see more moderate economic growth in the coming years.
Trade tensions and an uncertain global economic environment are also weighing on business decision-makers globally. For 2020, Ibec’s forecast of 3.1% GDP growth is contingent on the revised Brexit Withdrawal Agreement being ratified before the end of January 2020. No matter what the outcome, uncertainty is with us to stay. Future political developments will inevitably shape any trade deal, but it currently points to a far looser alignment than is currently the case. This brings with it the risk of potentially significant trade and regulatory barriers.
Commenting on the report, Ibec Chief Economist, Gerard Brady, said: “The Irish economy has now recorded several years of strong, sustainable growth. Record levels of business investment, rising wages, moderate inflation and a rapid improvement in household balance sheets have underpinned this growth. The unemployment rate is down to pre-crisis lows of 5.2% and long-term unemployment has fallen dramatically. No other developed country has seen an increase in real household incomes close to the 25% increase experienced in Ireland over the past five years.
“While the outlook is still positive, the pace of growth is likely to be more moderate in the coming years. Feedback from our members indicates businesses are increasingly finding that the tight labour market and under provision of vital infrastructure is materially impacting on companies' expansion plans. We are at a point now where numbers in employment will have increased by almost 500,000 since 2012. The failure to match this rapid growth in the number of people at work with a requisite increase in public infrastructure has given rise to growing congestion and problems in areas like transport, housing, and childcare. In turn, this is making it more difficult to attract and retain the workers needed to meet potential demand.
“While the decisions of large economies when it comes to investment, tax and trade will set the global economic backdrop for the Irish economy in 2020, the biggest challenge we face may be one within our own control. Ensuring that we match record private investment with a renewed and expanded public infrastructure will be the defining challenge of the coming years.”