By Geoff Percival
Consumer spending should grow by 4%, in value terms, this year — topping the €100bn mark for the first time — Ibec has said, but threats to Ireland’s competitiveness are resurfacing it warned.
In its latest quarterly economic outlook, the employers’ representative body forecasts continued strong growth for the Irish economy this year and next, but warned against complacency.
Ibec sees the overall economy — in GDP terms — growing by 5.6% this year and by 4.8% in 2019; still robust although down from near 8% growth last year.
But, it said, the major issue will be the country’s ability to sustain growth without experiencing significant competitiveness erosion. “As the economy reaches capacity, more co-ordinated action will be needed to make sure we do not repeat the mistakes of the past,” Ibec said.
“The story [in this report] is a positive one. The economy is growing, trade remains robust despite Brexit, and households are clearly benefitting through incomes which are increasing at the fastest rate in Europe,” said Ibec’s head of tax and fiscal policy, Gerard Brady.
“Our view that the economy is moving into a new post-recovery phase is supported by all these factors. It is important, however, that we do not become complacent. Previous periods of strong growth were undermined by a rising cost base dampening our exports and increasing challenges to quality of life. There is a particular threat from rising costs for our indigenous sectors which are already dealing with the uncertainty of Brexit,” he said.
Ibec said its own analysis suggests sterling’s deterioration since the 2016 Brexit referendum has wiped out the last ten years of competitiveness gains for Irish food exporters. However, it still sees export performance rising by 5.8% this year and by a further 4.4% in 2019.
Furthermore, the retail sector is not guaranteed a boost from the expected increase in consumer spending, with its share of spend already having fallen from 60% in the mid-1990s to 40% in recent years.
Ibec sees housing, entertainment, health and restaurants continuing to increase their share of the spend. It sees employment growth nearly matching last year’s 2.9% level and the unemployment rate falling to 5% — virtually full-employment levels — by the end of 2019. It has also disagreed with concerns about the overall quality of jobs being created, saying “there is little evidence to support this narrative”.
On escalating trade war fears, it said Ireland should dodge tariffs damaging the pharmaceutical/healthcare markets, but warned Ireland will be “the big loser” if liberal rules-based trading orders come under further strain.