Rising prices stalling Irish economy's post-Covid recovery, budgetary watchdog finds

• Author: Eoin Burke-Kennedy
• Published date: 23 November 2022
• Publication title: Irish Times: Web Edition Articles (Dublin, Ireland)

In its latest fiscal assessment the budgetary watchdog said the rising cost of living had weakened real incomes and that would lead to flatter consumption patterns in the coming quarters

Growth next year is expected to be just 0.4 per cent, down from a projected 5 per cent this year and 15 per cent last year. Ifac's warning comes as the OECD said falling real incomes would lead to a sharp slowdown in the Irish economy next year.

In its latest global outlook report, the OECD forecastsgrowth for Ireland of just 0.9 per cent in 2023, down from a projected 8 per cent increase this year, while suggesting high costs and low confidence would dampen investment.

As for Ifac, its outlook is further clouded by the prospect of recessions in Ireland's main trading partners, most notably the UK, while the recent spate of job losses in the tech sector, one of the key growth sectors here, signalled a change in the business environment.

Russia's ongoing war in Ukraine and its implications for energy and food prices also pose downside risks to the forecasts.

On the Government's recent budget, Ifac said the €11 billion package of measures struck "an appropriate balance" between protecting vulnerable households and avoiding fuelling further inflation. However, it noted the additional spend would add 1.3 per cent to prices out to 2025, over and above where they would have been.

The Government is forecasting a budget deficit of about 3 per cent this year when excess corporation tax receipts are excluded. This represented a substantial narrowing of the deficit (down from 5.1 per cent in 2021) even with cost-of-living measures, the defective concrete blocks scheme, and increases in public sector pay, the council said, reflecting "strong revenue growth and lower pandemic-related spending".

The Government's longer-term budgetary strategy, in particular its failure to set out a clear...