The latest reports on the economy paint a somewhat sobering picture heading towards 2023. While the Organisation for Economic Co-Operation and Development (OECD) and the Economic and Social Research Institute (ESRI) differ on the precise forecasts, both agree that the Irish economy will slow next year, after the surge in growth seen after the Covid-19 shutdowns.
The risks are clear, even if trying to estimate the outlook for Irish economic data is as difficult as ever. Real incomes are being hit by high inflation and this will affect consumer spending. Slowing overseas markets will be bad for exporters. And the outlook for investment is uncertain as companies in at least some sectors – notably technology – reassess their plans.
Both forecasts say that Ireland will avoid recession, while acknowledging that the uncertain international outlook means this remains a risk. The domestic economy will skirt close enough to a downturn – consumer spending is already sliding and higher interest rates are starting to bite.
While hit by poorer international prospects, the exporting sector may keep overall growth in positive territory, supporting the economy as it did during the pandemic. With a fall-off in consumer spending – and some company-specific factors – posing threats to the technology sector, continued growth in pharma and medical technology sales will be important. These companies tend to be lower profile than their tech counterparts, but they have also been very significant providers of jobs and tax revenues.
There are warnings in the forecasts for the Government. It may need to extend some special cost-of-living supports next year if less well-off households are not to see a big drop in real spending power. And the OECD underlines the perennial question of where new revenues will be raised to pay for an ageing population and the climate transition. The Government will hope that the corporate sector can continue to generate additional revenues so that this question can be avoided for a while longer.