Ireland’s economy is set to “worsen” – but we should avoid another recession, according to a leading Trinity economist.
He was speaking as the Department of Finance Secretary General prepares to warn the Oireachtas of a rocky road ahead for the economy.
John Hogan will today tell the Public Accounts Committee that, while Ireland is “better placed than most”, we are not immune to the financial issues facing countries all around the world.
On Newstalk Breakfast this morning, Trinity Economics Professor John Fitzgerald said Ireland was facing a slowdown but not a recession.
“I am afraid he is right,” he said. “We’re not immune from what is affecting the rest of the world.
“The effect of the Ukraine war and higher energy prices and as a result of that higher interest rates – all of that is going to slow down the world economy.
“The forecasts for Europe are, say in Germany, output might fall by 0.5% but even with a reduction in the forecast for Ireland, it doesn’t look as if the Irish economy will go into recession.
“It looks as if it will still grow slowly next year but it will be much slower than it would have been without the war in Ukraine and the energy price crisis.”
Corporation tax
Prof Fitzgerald said corporation tax would continue to offer Ireland a buffer – at least in the medium term.
“The multinational sector remains strong,” he said. “Alright, there are going to be some job losses, but it is strong.
“They made a lot of profits in the last 18 months so corporation tax this year and probably into next year will be up.
“So, that gives us some insulation against these problems, but it is going to affect us. everybody knows they have less to spend because of inflation and that in turn will mean, if people spend less, then shops do less well and so on, so, yes a slowdown next year.”
Supports
Prof Fitzgerald said the rate of inflation should come down next year but warned that the Government’s ability to offer cost-of-living supports would also fall.
He said corporation tax would also start to fall from 2024 – as the effects of the downturn filter through to the profits of major tech companies.
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