Ireland’s economy could be standing on the precipice of a significant, long-term shift in global economic conditions against a backdrop of rising global inflation and slowing growth, the National Economic Dialogue heard on Monday.
The one-day think-in, hosted by the Department of Finance in Dublin Castle, brings together stakeholders including unions, business groups, community sector groups and researchers before they produce their annual pre-budget statements.
Addressing the main plenary session of the forum on Monday afternoon, Minister for Finance Paschal Donohoe said that in the run-up to October’s budget it was important to recognise the degree of economic upheaval happening globally. “It is possible that we could be at the early stages of a change of global economic regime,” he said.
Where the “last regime” was characterised by “moderate to high growth, low inflation and low interest rates”, he said the global economy may well be “transitioning” to a polar opposite set of conditions. In that context he also that higher levels of government expenditure “will not automatically translate to higher levels of [economic] activity” given the constraints placed on the economy by global conditions.
It may also make medium-term economic planning more challenging for his department and policymakers in general.
Also speaking at the afternoon session, Frank Gleeson, president of employer’s group Ibec, said the economy was facing “turbulence, triggered mainly by the inflationary environment”.
Mr Gleeson, who is also chief executive of food services giant Aramark’s northern Europe division, said: “We’re going to see significant price inflation in the marketplace over the coming months. We’re already seeing it and it could be prolonged for quite a while.”
He said that the threat of higher labour costs remain a concern for employers. “The difficulty we have is if we chase the inflationary numbers with increased labour costs it then becomes a spiral where inflation will continue.”
Responding to Mr Gleeson, Patricia King, general secretary of the Irish Congress of Trade Unions (ICTU), said that notwithstanding the ongoing trade union campaign for public sector pay increases, workers were under increased pressure with inflation rapidly eroding their purchasing power.
“That is the stark reality,” Ms King said. “So from our point of view the big question that arises is, without cutting Revenue [Commissioners] income, how can we try to mitigate the worst effects of this [crisis] and achieve a balanced and sustainable outcome...without ending up in an austerity recession.”