Employment in the Irish economy will be nearly 500,000 up on pre-pandemic levels by the end of next year, employers’ group Ibec has predicted.
The Republic’s exceptionally strong employment trajectory “is way outside the norm amongst developed economies”, said the group’s chief economist Ger Brady.
However, he warned that the strong performance had led to capacity constraints in a range of sectors.
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“The constraints on economic activity that we’ve seen in 2024 in the form of high demand for infrastructure and barriers to the effective delivery of projects will remain the largest obstacle to domestic growth and investment in 2025,” said Mr Brady.
He predicted the labour market would remain strong in 2025 and that labour shortages would remain a key barrier for businesses seeking to expand. However, he noted there had been a slight fall-off in hiring momentum “following five years of rapid growth”.
“We expect to see further normalisation of the pace of hiring in 2025,″ he said.
Mr Brady highlighted the uncertain global environment in the form of a flagging euro zone economy and a potentially disruptive incoming US administration as a serious challenge for the Irish economy.
What’s in store for 2025?
“There are growing uncertainties in the global environment. Amongst our major trading partners, Europe is struggling to readjust its business model to new realities,” he said.
Germany’s Bundesbank predicts the region’s biggest economy will hardly grow in 2025 after shrinking again this year while ongoing political instability in France following the collapse of Michel Barnier’s short-lived government earlier this month has triggered a spike in French borrowing costs.
The prospect of US president-elect Donald Trump disrupting global trade is also considered a significant risk for the economy here. Mr Trump has threatened to build a wall or “a ring” of tariffs around the US economy.
“It remains to be seen how the new US administration will prioritise between the competing promises on domestic and trade policy,” said Mr Brady.
In its winter economic commentary, the Central Bank of Ireland last week pinpointed a protectionist pivot in the US as the main short-term threat to the Irish economy, noting it could spark a big disruption to global trade.
It warned that higher tariffs or changes in tax regimes that reduce the profitability of US multinational operations in Ireland could influence the future investment decisions of these companies.
“The Irish business model must continue to rely on a strength of providing certainty in economic policymaking whilst addressing on our own challenges at home,” said Mr Brady.
Highlighting the Government’s strong budgetary position, he said the State had “the financial resources and skills necessary to unlock our economic potential, arguably for the first time in the State’s history. We do, however, have binding capacity barriers ahead in areas such as housing, grid, water and transport infrastructure which are increasingly weighing on growth.”
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