Ireland may be at risk to vulnerabilities in key markets, says Ibec

Ibec’s Q2 Economic Outlook report also suggested that the implementation of UK border controls from October will impact unprepared Irish exporters.

Ibec chief economist Gerard Brady said the slowdown in some markets “may persist through 2023 and 2024”.

Ireland’s economic stability could become exposed to ongoing vulnerabilities in major trading markets despite recent indicators that it has outperformed its peers, an expert has warned.

Business group Ibec’s chief economist Gerard Brady said interest rate hikes and weak demand have contributed to slow growth in key trading markets for Ireland including the UK, Germany and China.

Mr Brady added that the slowdown in these markets “may persist through 2023 and 2024”. He made these comments following the publication of Ibec’s Q2 Economic Outlook. 

The report also suggested that the implementation of UK border controls from October will impact unprepared Irish exporters.  Ibec added that it understands most companies are ready for the new border restrictions, “though the cost implications of additional administration and delays will be challenging”.

Irish goods exports have seen some weakness in the first half of the year, the report said.

Pharmaceutical exports are down €3.5bn, or 6% annually. Electrical machinery and equipment exports dropped by almost €2bn, or 18%, driven by falls in exports of integrated circuits and processors. Ibec indicated that recent fluctuations in exports are due to the unwinding of covid-induced supply chain pressures.

Excluding the volatility in those two sectors, exports have increased by 3%. The performance of food and medical device exports have been particularly strong, the report said.

“With major investments underway across several FDI-driven sectors, particularly the life sciences sector, we expect exports will recover well from this period of unwinding and continue to grow in both 2023 and 2024 by 5.2% and 4% respectively,” said Ibec.

The report found that the overall global economy has remained resilient through a period of volatility with supply chain disruptions, soaring energy prices and inflation.

However, the lasting effects of these headwinds will lead to moderate global growth over the next 18 months, including in Ireland which has previously outperformed due to high corporation tax receipts.

"Already costs are a more prominent concern for businesses than in recent years. There are also signs of ongoing caution from households despite strong buffers for some," said Ibec.

Ibec predicted growth in domestic demand of 3.4% for this year and 2.3% in 2024, resulting from a slowdown following a period of record investment, higher employment levels and dented consumer spending growth due to the lagged impact of higher interest rates.