Pharma and IT exports should carry Ireland through another harsh winter, but can the economy continue to defy gravity?
“Very, very challenging outlook” for the global economy came this week courtesy of the Paris-based Organization for Economic Co-operation and Development (OECD).
A “period of pronounced weakness” is underway, said OECD Secretary-General Mathias Cormann yesterday, with Ireland’s main trading partners bearing the brunt.
The global economy will slow to 2.2 percent next year, with near-zero growth in the US and eurozone and the UK slipping into recession.
“The growth that we are forecasting on a global scale is very low growth,” Cormann said. “I don’t think anyone will take much comfort from a forecast of 2.2 percent global growth.”
While the OECD forecasts that multinational exports will carry Ireland through the worst of this winter, it shows the domestic economy will grow little next year (0.9 percent).
While the slowdown is nowhere near as severe as the domestic contraction Ireland has suffered during the pandemic, it does point to difficult times ahead for smaller businesses, particularly retailers and hospitality businesses.
The slowdown is set to follow a better-than-expected 2022 for both the domestic and multinational sectors.
The OECD and the government expect gross domestic product – a measure of growth including multinational sectors – to exceed 10 percent in 2022.
However, the European Commission said in a report yesterday that it was “comparatively more conservative” on “most growth drivers” for the Irish economy, noting recent job cuts at technology companies.
And the OECD said this week that Irish medical device exports will slow in 2024.
“Exports, particularly from multinationals, remain the driving force behind Ireland’s very high economic growth,” the European Commission said in a report yesterday.
“Despite these positive developments, Ireland’s high concentration of exports in a few sectors and companies can create growth volatility and increase risk to the outlook.”
Overall, however, the Irish economy is not ringing EU alarm bells.
The 2023 budget was approved this week by the European Commission – as well as the Irish Fiscal Advisory Council – despite concerns from both institutions over volatile corporate tax revenues.
Both have welcomed moves to set aside excess tax revenue in a rainy day fund.
However, the commission said the “affordability” of housing could be kept in mind.
“Concerns are mounting around developments in house prices,” officials at the commission said in an Alert Mechanism report, one of a series of studies released this week as part of the bloc’s annual economic surveillance.
“One of the highest price-to-income ratios in the EU raises affordability concerns.”
https://www.independent.ie/business/irish/ireland-is-defying-economic-gravity-but-how-long-can-this-continue-42165638.html Ireland is defying economic gravity, but how long can this go on?