IBEC, the group that represents Irish business, today said that the economy remains on track to expand by about 1% this year despite very difficult international market conditions. Publishing its latest Quarterly Economic Outlook, the group said that Ireland will benefit from the weaker euro more than any other eurozone country, which will ensure that exports drive a second successive increase in annual GDP. IBEC said falling interest rates will result in average mortgage costs falling by €2000 this year, increasing the spending power of mortgaged households by about 3%, but said consumer spending remains very weak and poor weather would further hit the domestic economy.
Commenting on its latest forecasts IBEC Chief Economist Fergal O'Brien said: "International trading conditions are tough at the moment given the sharp slowdown in almost all markets since the start of the year, but Irish exporters are faring relatively well. The weaker euro is a major positive for Ireland. When coupled with the hard gained competitiveness improvements of recent years, it means that Irish companies can grow both revenues and market share in what are largely stagnant international markets.
"Ireland sold 62% of its exports to markets outside the eurozone last year, well above the average for other member states. The annual average euro exchange rate this year against both the dollar and sterling is likely to be about 10% weaker than in 2011. The Irish economy will benefit more from this than any other eurozone country.
"This year, for the first time since 2007, the investment sector of the economy will not be a drag on growth. The improvement arises mainly from increased investment by firms in equipment and machinery, while construction sector activity is also closer to bottoming out. Consumer spending remains very weak, however, and the poor summer weather will further hit the domestic economy.
"Last week's successful bond auction shows the substantial improvement in Ireland's reputation with international investors over the past year. Markets are responding to sensible policy decisions, namely the yes vote in the recent Fiscal Stability Treaty referendum and strong implementation of the Memorandum of Understanding with the troika. The major task for Government now is to restore activity in the domestic economy and get more people back to work."
In its recently launched Action Plan for Recovery: 50 Ideas to Drive Growth, IBEC suggested a range of innovative ideas to Government to help the domestic economy and put more focus on this vital sector of the economy, including:
- reform pension rules to allow people to unlock and use part of their AVC and personal pension savings (Action 25)
- tax incentives to encourage additional home renovation activity and move work from the informal to the formal economy (Action 26)
- a new social welfare smart card system, to ensure child benefit payments are spent in the domestic economy (Action 27).
- IBEC Economic Outlook Q3 2012.pdf - 1,667 Kbytes