Irish economic outperformance ‘unlikely to continue indefinitely’, says Ibec

Ireland’s economic “outperformance” relative to global trends is “unlikely to continue indefinitely”, according to employer’s group Ibec, with investment levels and consumer spending expected to normalise in 2024 after several years of strong growth.

In its economic outlook report for the second quarter of 2023, the lobby group has kept its forecast for domestic economic growth unchanged at 3.4 per cent for 2023. Next year, however, it now expects growth of around 2.3 per cent despite a return to more normal levels of consumer price inflation of around 2.3 per cent.

Ibec said there have been some signs of moderation over recent months with forward looking indicators pointing to a slowdown in the pace of jobs expansion.

“Administrative data on payroll employees suggests hiring has slowed somewhat from 5 per cent annually at the start of the year, toward 2.5 per cent,” it said. “At the same time several sources on new job postings have shown a slowdown following a post Covid surge in 2022.”

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While still elevated at 22,800 in the first three months of the year, jobs vacancies “are now falling back towards more normal levels”, Ibec said, amid a “significant levelling off” in the number of foreign direct investment-linked jobs announced in the first half of the year.

Ibec chief economist Gerard Brady said there are also concerns about the trajectory of the global economy, which could impact the Republic’s overall performance. “Whilst the US economic performance looks very robust, major trading partners such as the UK, Germany and China are of greater concern,” he said. “All have material economic vulnerabilities due to rising interest rates and weak demand which may persist through 2023 and 2024.”

However, Mr Brady said: “A moderation in growth is not unexpected given the ongoing withdrawal of record fiscal support and the lagged impact from the fastest increase in interest rates since the 1970s. For the Irish economy, our recent outperformance is unlikely to continue indefinitely. It is our view that over the coming 18 months we will begin to see some moderation in the rate of growth in the economy.”