THE IRISH ECONOMY is set to grow by 4.3% this year, according to predictions by the Irish Business and Employers Confederation (IBEC)

This is a revision of the 6.1% predicted growth made at the end of last year. The revised forecasts come largely as a result of the economic impact from rising costs and supply chain challenges across the global economy, accelerated by the Russian invasion of Ukraine.

IBEC expects that consumer price inflation this year will run at around 6.1% for the full year – it had previously forecast this figure to be 3.3%.

The lobby group’s annual Economic Outlook report found that Irish households come into this period with record savings. At the end of February 2022, Irish household deposits had risen by €30 billion compared to the same month in 2020, to over €142 billion, or €28,000 per person.

IBEC Chief Economist and Head of National Policy Gerard Brady said that despite the revised figures, “our underlying business model remains strong and can deliver growth”.

“However, the global environment will drag on growth this year and next, with rising energy costs, record commodity and transport costs and global supply chain challenges resulting in a slowing of business investment and lower than previously expected consumer spending,” he added.

“Even if inflation growth slows, the level of energy, transport and commodity prices will now remain much higher for longer. The net impact of this in economic terms is both a relative price shock for consumers – reducing spending elsewhere – and the postponement and re-evaluation of investments in businesses and construction.”

Retail sales in January and February were up 12%, in volume terms on the same period in 2019 – showing the strength of the retail recovery from last year’s lockdown.

However, Brady added: “We are already seeing the challenges of commodity inflation starting to hurt our capacity to deliver much needed housing and infrastructure. It is vital that government works with industry to ensure that contracts are adaptable to the challenges of inflation and that it remains viable for much needed infrastructure projects to continue to address the multiple quality of life and sustainability issues the country faces.

The report also said that overall consumption remains unchanged but other sectors of the economy – particularly those reliant on discretionary spending – could lose out.

“This coming year will be a tight balancing act for policymakers globally. Measures to support households and businesses must be tightly targeted if we are to avoid adding fuel to the inflationary fire. At the same time, premature or misjudged monetary policy reactions could trigger an unnecessary economic contraction.”