The ending of almost all pandemic restrictions in Ireland will spur a “rapid rebound” in spending and investment that will be evident in growth in domestic demand of about 5.8 per cent this year, according to an economic report from Goodbody stockbrokers.
The firm’s Irish economic Health Check report for this quarter is bullish on the prospects for the Irish economy over the coming year. It also envisages some challenges for businesses and society, however, such as wage inflation that is predicted to hit Celtic Tiger levels and the return of the housing crisis as the number one issue facing the State.
It predicts an element of “creative destruction” in the Irish economy, as some companies struggle to survive after the Government removes subsidies but a surge in start-ups fills the gap.
The report identifies 10 separate issues facing the economy, covering topics such as inflation, the unwinding of Government financial supports and the “shifting sands” of domestic politics.
On housing, it said price growth would slow but would still be “pretty high” above historical and international norms. Goodbody predicts 6 per cent growth in house prices this year, compared with 14 per cent last year. It also predicts new house completions to rise from 19,200 in 2021 to 24,700 this year, and to 28,400 in 2023. “A supply deficit will remain given the buoyancy of demand,” says Goodbody.
The firm also says inflation pressures in the economy will intensify in 2022; inflation in the Irish economy reached a 20-year high of 5.5 per cent in December. Although the rate may peak soon, it says, inflation will still persist above pre-pandemic levels for a long time due to its broad base, labour shortages and “pipeline inflation pressure” such as material shortages in manufacturing.
“In a European sense, these inflation trends may become an increasingly bigger concern for the ECB as the year progresses. We have already seen a sizeable change in ECB rate expectations, with rate lift-off now expected to occur in 2023.”
Goodbody predicts the surge in domestic demand in the Irish economy in 2022 will put it in the top two performing European economies based on that metric.
