A consensus is forming among forecasters that the domestic economy is slowing, even if the peculiarities of Irish data mean their predictions still vary. The latest estimate from the Economic and Social Research Institute (ESRI) that modified domestic demand — a measure which excludes much of the multinational distortions — will grow by just 0.6 per cent this year is lower than most other forecasts.
However, the picture it paints of slowing but still positive consumer growth and a fall-off in investment levels is similar. Rising government spending, the final piece of the domestic economic jigsaw, is another factor.
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Measuring investment trends is tricky and the underlying picture of rising consumer spending offers some solace. But there is no doubt that consumers are feeling the pressure of higher interest rates and the cost-of-living crisis.
The mood music from many small domestic businesses is decidedly mixed, particularly in the retail and hospitality sectors. The cocktail of higher costs, labour shortages, cautious consumers and a Covid financial hangover is causing problems. More shopfronts are likely to be shuttered in early 2024.
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Much will depend next year on two things. One is the state of the international economy. The other, related, factor is how fast interest rates will fall. Either way, as the ESRI puts it, growth will moderate though the Republic is still likely to perform relatively well compared to other countries.
The public finances will also remain strong, the ESRI believes. After getting a full-frontal assault from the Irish Fiscal Advisory Council on its budget policies, the Coalition will be relieved that the ESRI just gives it an elbow on the way past, saying that the budget should have been more targeted.
It adds that even if there are questions about the wisdom of the budget spending rule, when the Government sets targets for spending growth, it would be better to keep to them.
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