Ireland’s surging economic growth could be at risk from emerging threats to the country’s competitiveness, business lobby group Ibec has warned.
In its latest quarterly economic outlook published this morning, Ibec has predicted that the Irish economy will grow by a robust 5.6pc in 2018, with the number of people in jobs expected to reach a record 2.2 million this year.
Ibec’s head of tax and fiscal policy, Gerard Brady, said the economy is now moving into a new “post-recovery” phase.
“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 characterised 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 in its report this morning that sterling weakness since the UK’s Brexit vote in 2016 has had a significant adverse impact on some Irish firms, in effect “wiping out” 10 years of competitiveness gains for Irish food exporters.
However, Ibec said sterling’s decline has had a “much more muted impact” on the wider Irish economy.
Despite the impact of sterling’s slide on the food sector, Ibec noted that food exports from Ireland rose 12.5pc in 2017, driven by dairy sales as global butter prices rose.
Notwithstanding the external threats to Ireland’s economy, Ibec said Irish workers are benefiting from the quickest real wage growth in Europe.
“As a result, total household purchasing power, excluding borrowing, has never been greater in the history of the State,” it noted.
The business group, headed by chief executive Danny McCoy, also dismissed concerns over the quality of jobs that have been created in Ireland in recent years.
“There is little evidence to support this narrative,” it insisted.
“In the past year, full-time employment increased by 6pc while the number of part-time workers fell by 7pc.”
The lobby group said that Ireland currently has the second-lowest proportion of workers on a temporary contract through the EU-15 member states – those countries that comprised the trading bloc prior to 2004.
“As unemployment falls further, it is likely that employment growth will slow as firms find it harder to fill job vacancies,” noted Ibec.
The business group has also welcomed the Government’s recently announced Project Ireland 2040 capital investment plan.
The 10-year plan is due to deliver €115bn in spending.
“For some time now, Ibec has identified a lack of investment in the economy as a major constraint to the new phase of economic expansion which is currently under way,” said the business group.
“The next step, and one on which the Irish State has a poor record, will be to expedite efficient project delivery and planning while delivering value for money,” according to Ibec.
Project Ireland 2040 will see a number of major infrastructure projects constructed.
They include the Dublin Metro project, which is set to cost in the region of €2.5bn, the €900m motorway between Shannon and Cork, and a Galway ring road that will cost an estimated €550m.
The State has also pledged to build 112,000 new social housing units by 2027, at a cost of €11.6bn.
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