Ibec: No recession in 2023, but it will feel like one for many
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The Irish economy will avoid a major contraction in 2023 but for many businesses and households it will feel like a recession nonetheless, Ibec has warned.
In its latest economic outlook, the business group projects the economy will expand by 2% in 2023, the slowest rate of growth since the onset of the recovery from the banking and property crash.
As recently as 2021, the Irish economy was growing at a super-charged rate of 13.6%.
Both exports growth and domestic demand will slow sharply as major economies such as Britain, Germany, and France, slide into recession, said Ibec in its latest outlook, called "An Economic Reset".
Ireland is in a good place to avoid recession but "for many people it will feel like one", Ibec chief economist Gerard Brady said.
Although down from over 8% this year, price inflation will persist next year, at the elevated rate of 5%, Ibec said.
It warns rising construction costs will weigh on housing supply.
House completions of around 30,000 this year will "flat line" in 2023, which is below the 35,000 new units set by Government targets, and well below "the real demand for housing", it said, as the population continues to grow.
Ibec's forecast for GDP growth of 2% in 2023 is significantly lower than the 4.7% rate the Government projected in the budget in late September.
Mr Brady said that higher interest rates will hit both households and businesses, in particular firms that are carrying large debts, but the costs will also weigh on start-ups and companies involved in parts of the property industry, he said.
The Ibec report nonetheless identifies the resilience of the economy and the comparative strength of the public finances.
Mr Brady said that the Government has "squirrelled away" a total of €12bn between a planned budget surplus and the money set aside in the National Pension Reserve Fund. Ireland is "in a unique position" to fund additional measures "should further support for the economy be needed into 2023 and beyond", he said.
The September budget package of €11bn included around €4bn in utility bill subsidies for households and businesses.
Exports growth will still be underpinned by the US despite many countries in Europe going into recession, Ibec projects, and Irish unemployment will fall to 4.3% in 2023 as vacancies stay at elevated levels.
Mr Brady said that Ibec members have reported that while facing difficult conditions, they do not see a prolonged downturn and are continuing to seek to recruit staff as posts remain unfilled.
The report finds that the European Union is "close to recession" and the British economy is possibly already in recession.
Following its bungled mini-budget, Britain faces "credibility woes" that have driven up the cost of its borrowing, although there is no immediate and direct hit for Ireland.
"The long-term prospect of a weaker UK economy will, however, impact on Irish SMEs for whom the UK remains an important export market," Ibec said.