IBEC, the group that represents Irish business, today said that 2013 is likely to be the turning point for the domestic economy, as businesses reinvest in their operations and consumers start to see income increases. Releasing its Quarterly Economic Outlook, the group said that as Irish households gain the same level of confidence in Ireland’s prospects as outside investors, recovery will gain momentum. 2013 will see employment in the private sector begin to grow again.
- GDP: IBEC estimates that Irish GDP expanded by 1.2% last year (4% in terms of value), making Ireland the second fastest growing eurozone economy in 2012, behind only Slovakia. IBEC forecasts GDP to grow at 1.8% this year and for the recovery to gain further momentum in 2014.
- Inflation: IBEC expects the Consumer Price Index to increase by an average of 1.5% this year and estimates inflation of less than 2% in 2014.
- Private sector employment: IBEC predicts that 2012 will be the last year of falling employment, with a return to marginal growth of 0.4% in 2013. Unemployment will stabilise, but will remain high for some time.
- Investment: Investment in machinery and equipment is estimated to have increased by 8% last year, across both traditional and modern sectors. It was the first time since 2007 that the investment sector was not a drag on economic growth. In 2013 this investment should increase again by about 10%.
Commenting on IBEC’s Quarterly Economic Outlook, IBEC Chief Economist Fergal O’Brien said: “The economy performed better than many predicted last year. Exports had another record year and a number of indicators suggest the domestic economy has stabilised and is poised to recover.
“Although many Irish households continue to grapple with debt and unemployment, there is growing evidence that 2013 could be a turning point for the domestic economy. We are edging towards a deal on Irish bank debt, which could provide a much needed boost in consumer sentiment. Last year mortgaged households experienced an improvement in their purchasing power of about 3%, as incomes stabilised and mortgage costs fell. While the property tax will put a further pressure on households, interests rates are set to remain very low and there will some increases in incomes.
“Exports continue to perform strongly, despite difficult trading conditions. Importantly, we’re seeing more businesses successfully making the transition from domestic sales to exports, and progress continues in developing new markets. This will lead to new job creation. Surging international investment in the sovereign, banks and utilities demonstrates that those outside of Ireland have growing confidence in our recovery. When Irish households start to have that same confidence, the recovery will gain greater momentum,” concluded Mr O’Brien.