In its latest quarterly report, Ibec has predicted economic growth of 5.7% this year, ahead of similar forecasts by both the government and Central Bank, but warned of a number potential risks.
The group says that Ireland’s economy has “firmly moved into a ‘post-recovery’ stage” with “households clearly benefiting from rising incomes” and a strong labour market underpinning employment.
Ibec says that 19% of people either started working or changed jobs last year, something that points towards the health of the labour market.
“With the economy approaching full employment the biggest challenge facing the Irish labour market will be finding workers to fill vacancies,” the report states.
Feedback from Ibec member companies suggests that firms are now finding it increasingly difficult to attract and retain talent. We have pointed out in previous editions of this publication that the outlook for net migration is not as strong as it was in the mid-2000s.
Despite these positive indicators, Ibec warned against complacency and pointed to “external threats” as a potential problem for Ireland’s economy.
As well as the impact of Brexit, Ibec says that a potential US-EU trade war also presents a risk for the economy.
Tariffs on steel and aluminium imports first introduced by the US and then by the EU in the past three months will have an affect on Ireland because of its dependency on US steel, Ibec says.
The group points out that Ireland has the highest dependency on US steel in the EU.
“Roughly 7% of our steel imports come from the US. This is driven by US multinationals such as medical device manufacturers using familiar suppliers in the US for intermediate goods,” Ibec states.
“Of total steel imports from the US, 40% will be subject to EU import tariffs. This will increase costs for businesses involved. If the trade war escalates further, Ireland has a lot to lose.”