THE SPRING ECONOMIC forecast looks markedly more upbeat according to the Irish business group Ibec.
It expects inflation to drop to 4% by the end of the year, while prolonged recession in Europe is “unlikely”, and it also projects growth in consumer spending of 3.5% in 2023 and growth in domestic investment of 8%.
Employment is predicted to grow although challenges will remain in attracting and retaining workers in the Irish economy.
“Our view is that there are now the ingredients in place for a quicker recovery in the global economy,” said Ibec – the Irish Business and Employers Confederation – in its new forecast.
The Q1 Economic Outlook, published today, it says that while significant uncertainties remain, there is reason to be “more confident” about 2023 than might have been expected last year.
Ibec said this is due to wholesale energy prices becoming less volatile, along with an easing in inflation.
“The mood music in the economy is much lighter as we enter Spring,” Ibec Chief Economist Gerard Brady said on the report.
“Recent data across the global economy point to some easing of inflationary pressures, less volatility in wholesale energy prices and signs that global demand is proving resilient despite sharp increases in interest rates.
“Europe is facing significantly reduced exposure to fluctuations in energy prices for 2023, due to higher-than-expected storage levels and reduced demand over winter. This, in turn, makes a prolonged recession in Europe unlikely.”
Brady added: “We now expect the domestic economy to grow by 3.6% in 2023 and inflation to fall to under 4% before the end of the year.”
However, he said this does not mean that the year will be without its challenges.
“Ongoing monetary tightening by Central Banks and tightness in energy markets carry risks for both financial stability and the broader economy throughout 2023.
“In addition, whilst the period of rapid inflation is behind us, inflation will remain relatively high compared to the lows of the past decade and price levels will remain high.”
For the labour market, Ibec cites high employment, rising wages and more active recruitment among employers as leading to “sharp decreases” in people remaining on unemployment supports, along with rapid growth in the overall labour force.
“Challenges in attracting and retaining workers in the economy will remain the key constraint on growth for the Irish economy over the years to come,” Brady said.
“Ireland’s major economic and social challenges within our control continue to be ones of capacity in housing and broader public infrastructure.”
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