Irish economy at important turning point
Ibec, the group that represents Irish business, today published its latest Economic Outlook report (see attached) stating that the Irish economy finds itself at an important turning point.
The report estimates that shifts in global capital markets and ongoing higher prices of commodities, such as energy imports, are already undermining the recovery momentum that characterised the first half of the year. Leading indicators and feedback from members suggest a slowdown is already underway in the growth rate of the two drivers of the domestic economy, consumer spending and investment, and this will continue into 2023. Ibec expects consumer spending growth to fall from 6.6% to 4% in 2023 and domestic investment to fall from 8.6% to just under 4%.
Marking the launch of the report, Ibec Head of National Policy & Chief Economist Gerard Brady outlined: “The Irish economy is at a turning point. Changes in the global environment – in commodity, energy and financial markets – are reshaping the global economy from the one we have recognised over the past decade. The era of record low interest rates, low inflation, and spare capacity we have lived through since the global financial crisis is being overturned. For Ireland, as a small open economy, shifts in the flow of capital through the global economy and slowdowns in our major trading partners can have an outsized impact on our growth model. Our members are already experiencing this through tighter capital markets and a greater focus on costs.
“The outlook for Irish business is marked by growing concern at rapid shifts in our competitive position and growing labour market policy costs being imposed by Government – which will most significantly impact on SMEs. This underlines the importance of controlling what we can here at home. As a society, we must plan for the long-term investments needed to grow our capacity and resilience in housing, energy, infrastructure and skills.
“There is a need to support those exposed to the downside of inflation. These supports should, however, be targeted at those businesses and households which are most in need. It is crucial that progress ongoing on an energy grant support scheme to help businesses through this challenging period is delivered in a timely manner. It is also crucial that the Government begin work on a time-limited labour market transition rebate, for companies which can show challenged viability due to State imposed increases in employment costs and regulation. This should come in the form of a temporary break from National Training Fund (NTF) payments and direct vouchers for training, skills, and productivity, funded from the almost €1 billion surplus in the NTF.”