Ireland’s Continuous Growth may Lead to Competitive Threats

According to a new forecast report, all households should finally start to see the benefits of Ireland’s recovering economy this year, with employment expected to reach the highest record of 2.2 million, and the Gross Domestic Product (GDP) rises 5.6 percent.

The Irish Business and Employers Confederation (IBEC)’s recent quarterly economic score predicts consumption expenditure will increase by 4 percent this year in value terms, as the economy approaches full employment with more than 2.2 million Irish at work, and Ireland will have the fastest income growth in the entire Europe. From this, it would put Ireland’s spending above €100 billion ($122,775,000,000), the first time in the country’s history.

According to Ibec’s report, “Total household purchasing power, excluding borrowing, has never been his greatest in the history of the State.”

However, Ibec added that the rising economic growth could be at risk from emerging threats to the country’s competitiveness.

According to Gerard Brady, Ibec’s head of tax and policy, the success of economic recovery is creating its own problems.

“It is important, however, that we do not become complacent,” he said.

“Previous periods of strong growth were undermined by a rising cost base dampening our exports and increasing challenges to quality of life.”

He added, “It is important we focus on the competitiveness factors we can control at home.”

“Despite improvements over recent years, Ireland’s economy remains characterized by the National Competitiveness Council as a ‘relatively high-cost location’.

“As a small, open economy, we remain extremely vulnerable to further external price shocks through exchange rates, interest-rate hikes or rising energy prices.”

Ibec points out a positive report this morning. The economy is growing, trade remains robust even if UK’s Brexit vote in 2016 had a significant impact on some firms in the country, and households are clearly benefiting through incomes which are increasing at the fastest rate in Europe.

Brady said that the main question facing the economy over the coming years would be Ireland’s ability to maintain its economic growth without experiencing ‘significant competitive erosion’. He added that it is important to focus on the competitive factors that can be controlled at home.

Looking Deeper

Sterling’s slide on the food sector is one factor of Ireland's economic boom because it results in a ‘much more muted impact’ of the wider economy. Ibec noted that food exports from Ireland rose 12.5 percent in 2017, driven by dairy sales as global butter prices rose.

On the other hand, Ibec CEO Danny McCoy dismissed concerns over the quality of jobs that have been proposed in Ireland in the recent years, “There is little evidence to support this narrative. In the past year, full-time employment increased by 6 percent, while the number of part-time workers fell by 7 percent.”

Ibec welcomed the Ireland government’s recently announced ‘Project Ireland 2040’. The 10-year plan is worth €115 billion ($141,201,600,000), which further develops the overall economy of Ireland from infrastructure, housing, to social welfare and development.

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