View of the Google EMEA headquarters building on the western side of the Grand Canal Docks in Dublin, seen during the Level 5 Covid-19 lockdown. On Friday, January 22, 2021, in Dublin, Ireland.NurPhoto | NurPhoto | Getty Images Ireland’s economic growth continued to outperform the eurozone average in the second quarter, but the country is still struggling with the same cost of living and energy security pressures as its neighbours.
Government figures show that Irish gross domestic product rose by 1.8% quarter-on-quarter, boosted by increased consumer and business spending, although it was down sharply from the 6.3% growth recorded in first term. The gross national product, which eliminates the profits of the many multinationals based in the country and which represent 54.8% of its economy, grew by 2.1%. By comparison, the eurozone economy as a whole grew by just 0.8% in the second quarter compared to the previous three months. The slump in eurozone business activity has some analysts, including the Royal Bank of Canada and ING, arguing that the bloc is likely to enter recession sooner than previously thought.
The UK economy, meanwhile, contracted 0.1% in the quarter amid similar recession warnings. And there are fears that Ireland’s growth will not remain as robust. “A number of indicators suggest that momentum has eased in the third quarter, while the outlook for the coming quarters has weakened considerably,” Irish Finance Minister Paschal Donohoe said in a statement on Friday. ‘Huge challenge’ Ireland faces the same pressures as its neighbors over the cost of living and energy security. A flash estimate released by the European Union’s statistics agency put Irish inflation at 8.9% in August, just below the eurozone average of 9.1%. And things are likely to get worse, according to Conall Mac Coille, chief economist at Irish financial consultancy Davy. , given the increase in household energy bills in winter. Utility company Electric Ireland has announced that residential electricity bills will be 26.7% higher and gas bills 36.5% higher from 1 October.
Gerard Brady, head of national policy and chief economist at Irish business lobby group Ibec, told CNBC there is “no question”. “Companies are starting to feel the strain as energy, commodity and transportation prices rise. “This is putting a lot of pressure on operating margins. It’s across all sectors as well, it’s a broad economic shock,” he told CNBC by phone. “Consumers will really feel the impact when winter comes, but businesses are already seeing three-to-three bills. five times more, so for energy-intensive industries it is a big challenge.
“This includes dairy businesses, which contributed €16 billion ($15.9 billion) to the Irish economy last year, according to trade association Dairy Industry Ireland. Its director, Conor Mulvihill, told CNBC that many companies have increased their income over the past year, but this has been “absolutely wiped out” by higher costs such as feed, fertiliser, diesel and energy in particular. The market, with Irish employment in an all-time high of 73.5%, also means it has been a challenge for companies to recruit and retain workers, Mulvihill said.With its close ties to the European energy market, and in particular the UK, whose imports. around 75% of its gas: Ireland faces similar concerns about the potential for shortages this winter Energy company National Grid, which controls UK supply lines, says Ireland will not be cut , but it feeds them visits to both countries remain a possibility.
Fuller coffers As European governments plan to weather the winter cost of living storm, Ireland is to announce energy bill subsidies and other support measures totaling €6.7 billion in its 2023 budget on September 27. The current economic health of the country does. give him additional leeway.
Figures released in August showed state finances emerged from a Covid-era deficit to a €6bn surplus. The country’s multinationals, many of which have been attracted by its low 12.5% corporate tax rate, include tech giants such as Alphabet, Meta , Intel and Amazon; and pharmaceutical companies such as Pfizer and Johnson & Johnson. The higher profits made by these companies during the pandemic helped drive a 30% year-on-year rise in corporate tax last year, totaling €15.3 billion, about the same as it collected in the value added tax. Unstable terrain?
The dominance of a group of companies makes Ireland vulnerable to sectoral slowdowns, noted Davy’s Mac Coille. An imminent increase in the corporate tax rate to 15% has also raised questions about whether the relatively small economy can maintain its appeal to big business. On the consumer spending front, the current upward trajectory also looks fragile, with a KBC Bank consumer sentiment index falling in August to a late-2020 low.
And for many, the new challenges economic development in the face of a housing shortage that has been worsening for a long time. House sale prices are up 11% year-on-year, according to property website Myhome.ie, while rental prices rose to a record high. high in August after rising 12.6%, figures published by Daft.ie showed. Rachel, a 27-year-old HR worker from Kildare who is currently looking for flats in Dublin, says she is shocked at how bad things have become since she moved to the capital four years ago. “I’m checking property sites on my phone constantly and when I clicked on the link, the ad was pulled,” he told CNBC. The quality of what you can get for the same money has deteriorated, she said, and she and her friends feel pressured by the higher bills. “For renters and definitely for people most in need – in energy poverty, in pensions – there’s a real anxiety about winter. People are afraid of the unknown and definitely looking at the budget,” he said .