Ireland to be fastest growing economy in Europe
Ibec, the group that represents Irish business, today said that despite disappointing preliminary growth figures for the third quarter, the economy will significantly outperform the rest of Europe and grow by a spectacular 5.7% this year. In 2014 the recovery finally reached the domestic economy. Unemployment is falling, investment is on the rise and the Irish consumer is looking ahead with more confidence.
In its latest Quarterly Economic Outlook, Ibec highlighted a number of risks and opportunities on the horizon for 2015. Lower oil prices will add extra momentum to the consumer recovery. Every $10 fall in the price of a barrel of oil translates into an additional €100 million spending power for Irish consumers. While this will support more spending in the domestic economy, weakening oil prices are clearly a symptom of emerging market instability. Looking ahead, Ibec forecasts continuing strong growth in 2015, with GDP rising by 4.8%. Ibec forecasts GNP to rise by 5.1% this year, and 4.2% in 2015.
Ibec Head of Policy and Chief Economist Fergal O’Brien said: “Ireland is well placed to continue growing strongly next year. Unemployment looks set to fall to 10.5% this year and we predict a further drop to below 9% next year. Consumer confidence is on the rise and Christmas sales this year look set to be at their highest level since 2009. €80 million more will be spent in the shops this December compared to last. These positive trends look set to continue over the coming months as low inflation supports consumer purchasing power. Record low interest rates should further boost investment.”
Other key issues highlighted in the forecast include:
- Weak euro: The weak euro and a gradual recovery in global demand will support Irish exports, which will remain an important driver of the economy.
- Investment: Leading indicators, including Ibec’s business sentiment survey, signal that the broad based recovery in investment spending will continue. Ibec forecasts investment to grow by 11% in 2014 and 13% in 2015.
- Consumer spending: Despite some disappointing Q3 personal consumption figures, a continuing recovery in consumer fundamentals, as well as improvements in leading indicators, means there is little change to our expectations for consumer expenditure. Ibec forecasts spending to grow by 1.3% in 2014, and 2.7% in 2015.
- Employment: Employment growth is set to rise to 2.6% in 2015, with much of this growth in full-time employment. Ibec forecasts unemployment to fall as low as 10.5% by the end of 2014, and to below 9% by the end of 2015. But we still have a long way to go.
- Public finances: The public finances have improved much quicker than expected. Strong tax revenue growth, along with prudent expenditure controls, will see the deficit fall towards close to 2% in 2015.
Mr O’Brien continued: “Growth is coming from a broad range of sources, with domestic demand and trade contributing strongly. Ireland is set to be one of the world’s best performing developed economies this year. Much has been made of the impact of contract manufacturing on Irish GDP. This should not detract from underlying strength in the economy and exports including traditional sector exports. The impact of contract manufacturing on GDP is likely to be fairly limited over time.”