Ireland’s economy will grow at its slowest pace in three years in 2017, according to the employers’ group Ibec.
In its latest quarterly outlook, the lobby group says it expects GDP (gross domestic product) to expand by just 2.8 per cent next year amid growing political and economic uncertainty abroad.
It also downgraded its GDP growth forecast for this year to 3.7 per cent, down from 3.9 per cent previously.
“To date, Ireland’s impressive growth has been spurred on by relatively strong US and UK performances, a benign global backdrop, low interest rates, falling oil prices and favourable exchange rates,” Ibec economist Gerard Brady said.
“But the world is becoming more unstable, politically and economically. We can no longer rely on these external factors.”
In its report, Ibec also warned that recent gains by sterling against the euro were likely to be unwound when the UK government triggers Article 50, the formal EU exit mechanism.
Over the longer term, it said, the fundamental weakness in the UK economy would most likely mean a level of euro/sterling above £0.90, noting the impact of sterling’s collapse on indigenous exporters remains “a massive worry”.
It highlighted that output in food manufacturing, the State’s largest indigenous export sector, fell by 2 per cent annually in the first three quarters of the year and that the pace of the deterioration was continuing to accelerate.
These figures point to turnover loss of almost €700 million in the food industry in 2016, it said.
“This has major implications for rural areas,” Mr Brady said, noting about 10 per cent of turnover in the sector was spent on wages and salaries and 40 per cent on intermediate purchases from the primary agri-sector.
Despite the downward adjustment to headline growth, Ibec said it expects jobs growth to continue with employment levels returning to their 2006 peak by the end of 2017 on foot of strong growth this year and next.
Strong employment growth has been one of the signature features of Ireland’s recovery to date. In its report, Ibec noted that eight of 14 sectors of the economy had surpassed their 2007 employment peaks.
Only in retail (31,900), industry (39,700) and construction (134,000) is employment significantly below its pre-crisis levels.
In its report, Ibec said it expected consumer spending to grow by 3.7 per cent in 2016 and 3.3 per cent in 2017 with the majority of firms intending to give staff pay increases next year.
“Making the right economic choices at home will play an increasing and pivotal role in how the economy performs in the coming months and years,” Mr Brady said.