While the report points to a “soft landing” for the Irish economy throughout this year and the next, with growth moderating rather than reversing, analysts see significant risks to Ireland’s economic model on the horizon.
Irish GDP will grow by 2pc this year and by 2.7pc next year, according to the latest Ibec quarterly economic report.
‘The greater risk to fiscal stability lies in our failure to complete big infrastructure projects’
While GDP has been volatile in recent years, the core of the domestic economy, including jobs and tax revenues, has seen sustained growth.
However Ibec anticipates a “moderation of growth” after five years of economic expansion.
The report also pointed to a number of challenges that could impact Irish economic growth in the future, including direct competition for foreign direct investment from large economies that are increasingly willing to flex their muscle to attract jobs, as well as from global trade tensions.
The result of the US election in November is among the factors which could influence growth, Ibec reported.
The business lobby group also highlighted the under-delivery of critical infrastructure in Ireland, which could contribute to a slowdown in growth for both Irish companies and FDI in the coming years.
Ireland’s ‘experience economy’ has seen strong growth this year
“Too often, the focus is on cost efficiency in large-scale projects, but the greater and more immediate risk to economic growth, social cohesion, and fiscal stability lies in our failure to complete these projects,” said Ibec’s chief economist Gerard Brady.
“Successfully addressing housing, transport, and water infrastructure, making strategic decisions on funding education and skills, and setting out a transformative vision for our energy future are generational opportunities for Ireland,” he added.
Consumer spending is expected to rise 2.6pc this year as a result of rising employment and wages. This figure is expected to increase 2.9pc in 2025.
Ibec now expects exports of both goods and services to be up by more than 5pc this year
The strongest growth in credit and debit card spending so far this year has been in the “experience economy” – particularly in dining and entertainment.
Ibec reported that this increase in spending occurred even as rising costs for businesses in this sector led to higher prices being charged to customers.
In the first half of the year, spending on electronics and cars jumped 22pc and 18pc respectively, while clothing purchases rose 12pc in the same period.
Exports fell 4.8pc last year after three years of double-digit growth during the pandemic. This sudden decline in 2023 was attributed to a fall in sales of pharma products following soaring demand for Covid-related products.
However, a return in demand for pharma exports contributed to a 10pc increase in exports in the first five months of 2024 compared to the same period in 2023.
Ibec now expects exports of both goods and services to be up by more than 5pc this year.
Mr Brady called on the Government and on Finance Minister Jack Chambers to prioritise global competitiveness in the upcoming budget by “enhancing investment offerings, fostering innovation, and investing in critical skills and infrastructure”.