The economy will grow at a fair clip but the lack of housing, transport, and childcare is holding back business expansion plans and could shape up as the biggest challenge facing the country, Ibec has said.
The employers’ group predicts the economy will expand by over 3% next year, and inflation will only rise to 1.3%, but growth will moderate as businesses find it harder to recruit staff, amid shortages in urban areas.
It projects housing completions will reach up to 23,000 next year — far short of the 35,000-plus new homes many economists believe are required annually.
Rental costs, which have grown at the fastest rate in western Europe in the past five years, will loom large as “a major competitiveness challenge” for business.
Wages are growing at around 3% and amid continuing employment growth, there is a risk of the economy overheating next year, Ibec says.
Another constraint is the low level of migration, as eastern Europeans stay at home in economies that are doing well, while more Irish nationals are leaving than returning home.
Ibec says the 4,100 people coming from eastern and central Europe in the year to April compares with 64,900 at the peak of the boom in 2007.
The future shape of a Brexit deal will continue to weigh on the economy, but “ensuring that we match record private investment with a renewed and expanded public infrastructure will be the defining challenge of the coming years”, said chief economist Gerard Brady.
Employment numbers have climbed 500,000 since 2012 but “the failure to match this rapid growth in the number of people at work with a requisite increase in public infrastructure has given rise to growing congestion and problems in areas like transport, housing, and childcare”, Mr Brady said.
“While the decisions of large economies when it comes to investment, tax, and trade will set the global economic backdrop for the Irish economy in 2020, the biggest challenge we face may be one within our own control.
Ensuring that we match record private investment with a renewed and expanded public infrastructure will be the defining challenge of the coming years,” he said.