Business group Ibec has downgraded its forecast for domestic demand due to rising costs and a weaker outlook for the global economy.
In its latest Quarterly Economic Outlook, Ibec said domestic demand will grow by 3% in 2023, a downgrade from close to 4% in its previous set of forecasts in July 2022.
The report states that the international economy is in a place of significant challenge due to high rates of inflation, rising interest rates, accelerated monetary tightening and volatile energy markets.
For 2023, Ibec is forecasting that GDP will grow at a rate of 2%.
It said that while Ireland will avoid a recession, households and businesses will feel the slowdown in many of our major trading partners.
“Whilst Ireland’s economic momentum in the first half of 2022 was extraordinarily strong, there are now several leading indicators that suggest the volume of activity in the consumer economy and labour market may be beginning to slow,” said Ibec Head of National Policy & Chief Economist, Gerard Brady.
“The weakness of the global growth outlook remains the most significant risk factor for the economy in 2023.
“As a small open economy, we are exposed to the prospect of a global economic slowdown and recessions in some major trading partners.”
According to the outlook, further monetary tightening by Central Banks carries risks for both financial stability and the broader global economy throughout next year.
“Ireland is in a unique position in Europe with tax revenues growing rapidly, allowing the Government to engage in both higher spending and to run a significant budget surplus,” Mr Brady said.
“This strong fiscal position, along with strong economic momentum, and some of the highest household savings in Europe gives us the tools to weather the storm hitting major trading partners,” he added.
Ibec said that measures such as the Temporary Business Energy Support Scheme should be timely and adequate in order to protect the business economy throughout the winter.