Ibec publishes latest Economic Outlook report
Ibec, the group that represents Irish business, today published its new Q4 Quarterly Economic Outlook, which forecasts volume of GDP will grow by 13% in 2021. The Outlook says that the Irish economy is going through a period of exceptional growth despite the backdrop of Covid. This, in turn, should allow us to confidently support those sectors worst impacted by the path of the virus over the winter months by extending the effective and well understood Employer Wage Subsidy Scheme (EWSS) scheme. For 2022, Ibec forecasts that growth will run at a rate of 6%, with unemployment falling rapidly to pre-Covid norms and with ongoing competitiveness pressures throughout the year.
Commenting on the report, Ibec Chief Economist, Gerard Brady, said: “The Irish economy continues to see rapid demand growth. This is exemplified by a tax take which was up by €7.4 billion (13%) in the January to November period relative to the same period in 2019. This growth is broad based and being felt by most households and businesses. Income growth and significant savings mean the consumer fundamentals will remain strong in 2022.
“Our experience of 2020 and 2021 also shows that most sectors are incredibly robust despite a challenging backdrop. However, a relatively small share of businesses and workers are being asked to bear most of the economic burden of renewed Covid restrictions and the changes in behaviour we are being asked to make to protect public health. Strong growth and a rapid overperformance in exchequer returns should give us the confidence to maintain key supports for these sectors throughout a challenging Winter.
“The Government has made the right choices on supports since March 2020 and Ibec supported the phased withdrawal of supports until the recent change in the public health landscape, but there is a clear need to reverse course for now. Given the changed circumstances, the risk of withdrawing supports too early remains material and could result in higher costs of business failures and lost employment in the long-run. The short-term maintenance of the EWSS is crucial given that it is well understood, targeted to those with major losses in revenue and is designed to keep people in contact with their employer.
“Rapid economic growth has been accompanied by ongoing cost and competitiveness pressures. These pressures derive from global trends in rising energy costs, ongoing supply chain disruption and a tight labour market across economies. Despite the re-introduction of some restrictions across Europe, we expect this pattern of strong demand and supply challenges to continue into the early part of 2022. Initial supply bottlenecks in ‘lean’ supply chains as the global economy re-opened have been exacerbated by companies building buffer inventories of key materials. In addition, gas price futures are running above €80 per megawatt-hour out to the end of March 2022. Temporary increases in commodity or energy costs, such as these, will act as a sort of time limited tax on households and businesses.
“We face more significant challenges ahead. 2022 will see structural competitiveness challenges such as labour shortages, the low carbon transition, Brexit and OECD tax reform dominate our competitiveness landscape. As a small open island economy, our ability to withstand shocks into the future will be reliant on helping businesses improve productivity, adopt new technology, innovate and upskill. If we get these right, we can look forward to 2022 and beyond with renewed confidence.”