Economy set to grow despite external threats, says Ibec

Strong economic growth is forecast for this year and next despite external threats such as Brexit. But there is no room for complacency, Ibec has said.

Publishing its latest economic outlook, the business group projected GDP growth of 5.7 per cent for 2018 and 4.3 per cent for next year. It also said it expects consumer spending will rise by 2.9 per cent in volume terms this year and by 3.1 per cent in 2019.

“The economy is growing, trade remains robust despite Brexit, and households are clearly benefitting through incomes which are increasing at the fastest rate in Europe,” said Gerard Brady, Ibec’s head of tax and fiscal policy.

He said the Irish economy had firmly moved into a ‘post-recovery’ stage with both employment and consumption comfortably passing their pre-crisis peaks.

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“With the economy approaching full employment the biggest challenge facing the Irish labour market will be finding workers to fill vacancies. Feedback from Ibec member companies suggests that firms are now finding it increasingly difficult to attract and retain talent.”

Complacency

While the latest report is generally upbeat, Ibec warned against complacency on competitiveness at a time when external threats could impact on growth.

“As the economy comes close to capacity and navigates significant challenges to our external environment over the coming years it is important we make the right decisions to protect our indigenous industry,” said Mr Brady.

Ibec urged the Government to adopt a renewed focus on competitiveness in Budget 2019. It also called for more investment in infrastructure, education and innovation as a means to protect the economy from any future downturn.

Separately, a new study shows that despite 70 per cent of businesses in the Republic expecting Brexit to have a negative economic impact, just six per cent have a plan in place to deal with it.

The situation is worse in the North where just 5 per cent of companies have formalised a strategy to deal with the consequence of Britain leaving the European Union, the latest AIB Brexit sentiment survey shows.

Not surprising, industries that are most likely to be affected by Brexit, such as the food and drink, tourism and transport sectors, are more likely to have a plan, as are larger companies.

While businesses north and south have been slow to put strategies in place, many have rethought investment decisions with 22 per cent of companies in the Republic having either postponed or cancelled expansion plans, a figure that jumps to 49 per cent for businesses in the north.

Hard border

With fears of a no deal growing, 32 per cent of companies in the State now expecting a hard border, versus 15 per cent of businesses in Northern Ireland.

The latest survey comes as the Daily Telegraph reported that Britain will recognise some EU regulations in the event of a no-deal Brexit to ensure continued access to medicines, car parts and chemicals.

EU exit talks restart between Dominic Raab, secretary of state for exiting the European Union, and Michel Barnier, the EU's chief negotiator, in Brussels this week. Mr Raab is also due to give a speech on Thursday, outlining the British government's plans for a no-deal.