Updated 9.58am
IRELAND’S ECONOMY WILL continue to outperform its European counterparts, employers’ group Ibec is predicting, but it doesn’t mean the Government has a lot of cash to splash around.
Consumers may also begin to notice higher prices in the shops for some products.
The group believes the economy will grow by 5.4% this year, revised up from 4.8% in its previous Economic Outlook report, and ambitiously predicts that unemployment will fall below 9% this year.
The recovery is being boosted by a fall in the value of the euro following the introduction of quantitative easing. Chief economist with Ibec, Fergal O’Brien said:
“Ireland will benefit more than any other eurozone country because of the high level of trade with the UK and US, but the increased cost of some imports will offset a portion of the benefits,” he added.
These higher import costs are also likely to feed through to consumer prices over the coming months.
Pay rises will be arriving quicker in certain parts of the economy faster than others, O’Brien noted.
Different sectors and companies are recovering at different rates. Two-thirds of domestic services companies and half of traditional manufacturing companies are unable to afford pay increases this year.
“Economic growth will in time translate into pay increases across the economy.”
One area that is in line for pay restoration is the public sector, with Minister for Jobs Richard Bruton telling RTÉ’s Morning Ireland that full restoration is possible, and stressed that more innovation is needed in the sector.
However, this must be done “in the context of getting back to full employment.” The Minister said he believes it is possible to secure full employment for an entire generation.
He described the previous practice of benchmarking as “a fatal mistake”.
Ibec said it believes “productivity improvements must be maintained” in the public sector, “and pay levels should not be allowed to drift way of line with competitor economies again”.
Despite these positive economic trends, Ibec is urging the Government to be cautious in its upcoming Spring Statement.
“Strong growth can be maintained, but only if we manage the recovery sensibly,” O’Brien continued, stressing that the first item on the agenda should be reducing the marginal tax rate.
The policy of continuing to tax high skilled workers at a penal 52% rate does not make economic sense and should be abandoned.
Minister Bruton said in the past fews Ireland has become ‘a much higher tax country, and there is a problem’, and said he supported the approach taken by Government so far.
Ibec is also calling for ambitious investment in capital projects, education, and innovation, with strong supports put in place for entrepreneurs.
Originally published 7.30am
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