Ibec publishes Economic Outlook report for Q1 2023

Ibec, the group that represents Irish business, today published its new Q1 Economic Outlook, which forecasts growth in consumer spending of 3.5% in 2023 and growth in domestic investment of 8%. The Outlook says that while significant uncertainties remain, recent reductions in the volatility of wholesale energy prices, an easing of inflationary momentum and resilient global demand mean that we should be more confident about 2023 than we might have expected to be late last year. As a result, Ibec has upgraded its forecasts for both consumer spending and overall domestic demand in the Irish economy by 0.5 percentage points. 

Commenting on the report, Ibec Chief Economist, Gerard Brady, said: “The mood music in the economy is much lighter as we enter Spring.  Recent data across the global economy point to some easing of inflationary pressures, less volatility in wholesale energy prices and signs that global demand is proving resilient despite sharp increases in interest rates. Europe is facing significantly reduced exposure to fluctuations in energy prices for 2023, due to higher-than-expected storage levels and reduced demand over winter. This, in turn, makes a prolonged recession in Europe unlikely. All of this together, means we have upgraded our forecasts for both consumer spending and overall domestic demand in the Irish economy. We now expect the domestic economy to grow by 3.6% in 2023 and inflation to fall to under 4% before the end of the year.

“This does not, however, mean that the year will be without its challenges. Ongoing monetary tightening by Central Banks and tightness in energy markets carry risks for both financial stability and the broader economy throughout 2023. In addition, whilst the period of rapid inflation is behind us, inflation will remain relatively high compared to the lows of the past decade and price levels will remain high. The process of allocating the cost of higher price levels will accelerate as Governments withdraw fiscal support, triggering further pressure for both businesses and households.

“Our view is that there are now the ingredients in place for a quicker recovery in the global economy. The Irish labour market will remain tight – with employment growing. High employment, rising wages and more active recruitment among employers are leading to sharp decreases in people remaining on unemployment supports along with rapid growth in the overall labour force. Challenges in attracting and retaining workers in the economy will remain the key constraint on growth for the Irish economy over the years to come. Ireland’s major economic and social challenges within our control continue to be ones of capacity in housing and broader public infrastructure.”