Economy 'at a turning point', Ibec warns

Muireann Duffy

The Irish economy is at a turning point as changes in the global environment are "reshaping the global economy from the one we have recognised over the past decade", Ibec has warned.

The business representative group's latest quarterly economic outlook said the era of low interest rates and low inflation that followed the last economic crash is being overturned, with Irish businesses already noting a changing landscape through the tightening of capital markets and an increased focus on costs.

Ibec predicts higher prices, particularly for energy, are likely to last for some time, which may lead to an "ongoing adjustment in Irish living standards".

Ireland's strong recovery off the back of the Covid-19 pandemic is expected to stall towards the year-end, as businesses and households grabble with higher prices, hitting the two key drivers of the domestic economy - consumer spending and investment.

The group predicts consumer spending will fall from 6.6 per cent this year to 4 per cent next year, while domestic investment will drop from 8.6 to 3.7 per cent.

The annual average for inflation is expected to be in the region of 3.9 per cent, but comes off the back of this year's figure of 7.5 per cent.

Overall, Ibec says the country must focus on the long-term investments needed to grow capacity and resilience in housing, energy, infrastructure and skills, adding: "There is a need to support those exposed to the downside of inflation."

The group says these supports must be targetted at those most in need, warning that the introduction of sweeping measures would risk adding inflationary pressure.