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Ibec forecasts 2% growth in GDP in 2024

Business group Ibec says the Irish economy is still performing robustly, despite rising inflation and higher interest rates.

In its first Quarterly Economic Outlook for the year, Ibec is forecasting growth in GDP of 2% this year and 3.4% in 2025.

The report forecasts higher growth in exports, investment and it says the overall economy is expected to grow this year and next, on the back of falling inflation, and anticipated interest rate reductions.

Gerard Brady, Ibec Head of National Policy and Chief Economist, said falling inflation and anticipated interest rate cuts this year should provide a boost to the economy.

He pointed to the fact that the economy added 90,000 jobs in the past twelve months further evidence of the robust performance of the economy.

“For consumer facing businesses, the fall off in inflation to 2.3% in 2024, combined with high employment and rising wages will mean a return to real income growth for households, even though prices facing consumers will remain higher than previous years due to higher global commodity costs,” he said.

“Whilst the domestic market remains in a much better position than in much of Europe, there are broader concerns about the strength of the global economy which will weigh on Irish growth in the coming years.”

The global economy is entering a period of major change, the report claims.

Ibec anticipates the coming years will see more State subsidised competition for investment in new technology, falling levels of trade openness and rising geopolitical risk in global supply chains, energy and commodity markets.

It says each of these means that there will be a more uncertain and volatile business environment facing Irish companies selling abroad, which in turn will increase focus on managing volatility, reducing vulnerability to inflationary swings and addressing overall competitiveness concerns.

“For the Irish economy, this means there will need to be a renewed focus on cost competitiveness, skills, infrastructure and our capacity to innovate to safeguard our export-led growth model,” Mr Brady stated.

Ibec says the Irish export model has been the driving force behind our economic success for several decades.

It has thrived in a global economy defined by a multilateral global order, a focus on opening markets and greater trade integration, it claims.

For domestic policy these changes in the global economy will reduce the margin for error when it comes to improving our domestic cost competitiveness, skills, infrastructure and capacity to innovate, it says.

“Much of the underperformance in exports and capital investment last year was driven by once-off impacts caused by the timing of big investment decisions and reducing demand for Covid-related products in the BioPharma sector,” Mr Brady said.

“Headline economic figures for last year belie a robust performance on the ground, with 90,000 additional jobs added and a domestic economy that compares favourably with much of Europe.”

“For this year, we expect GDP growth of 2%”

He said this will be driven by a marginally stronger performance in the global economy and an improvement in some sector and product specific sales which had cast a pall over overall exports in 2023.

“It remains the case, however, that intensified global competition in some sectors and relatively weak growth in key trading partners, particularly in the Eurozone, will mean more subdued export growth than had been the case for much of the past decade,” Mr Brady predicted.

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