The provisional figures from the National Accounts announced last week expose fundamentally varying assessments of Ireland’s economic landscape in 2023, subject to the metrics utilised.
GDP is somewhat ineffective at highlighting Ireland’s true economic state, due to distortion from international sectors, with its 3 per cent decrease in 2023 – spelling an economic downturn – giving conflicting information to other metrics. In contrast, the Gross National Product (GNP) that eradicates some influences of multinational businesses, exhibited a striking 4.4 per cent growth.
In the Irish fiscal landscape, GNP has mostly been substituted with the adjusted gross national income, or GNI*, which filters out additional distortionary elements of our globally integrated economy, like depreciation on intellectual property and aviation leasing. Nevertheless, GNI* data will only be accessible six months post year-end. The Modified Domestic Demand figure released last week by the CSO probably provides the most accurate reflection of the economic performance in 2023 from all the National Accounts methods, demonstrating a 2.6 per cent growth.
Although the countless measurement methodologies of economic performance can prove overwhelming, even to those well-versed in national accounting, perhaps the most unambiguous gauge is the Labour Force Survey data relating to employment. This data reveals a 3.4 per cent increase in employment in 2023, indicating no sign of an economic slowdown.
However, a downturn in construction employment, coupled with a 7 per cent plunge in investment, could signify potential threats to future growth. A close to 10 per cent inflation in housing investment was equalled out by a 4 per cent decline in other investments, culminating in a net decrease overall. Part of this downturn might be credited to the completion of the expansive Intel unit in Leixlip, and a slump in office construction. But it is tangible that Ireland needs significant investments in water, energy, transport, and healthcare. It’s imperative that the resources made available by a downturn in office construction are reassigned where they are most required.
The Labour Force Survey data also verify that Ireland’s economy is operating at full capacity, with no extra capacity available: the unemployment rate for Irish natives in the previous year was an all-time low 3.8 per cent, with an overall unemployment rate of 4.2 per cent. Given there will always be employment transitioners, an unemployment rate of 4 per cent generally denotes that Ireland’s employment is at full capacity.
An economy in need of significant housing production, infrastructure improvements and optimized public services is facing challenges due to a scarcity of skillful workers. This shortage is anticipated to stifle growth in the near term. Historically, during times of high unemployment in the 20th century, creating job opportunities was a key priority of all governments. However, the current economic boom relies heavily on the recruitment of skillful personnel from overseas to work and reside in Ireland. Previous year’s records show that only 40,000 of the 90,000 new jobs were filled by Irish individuals. The workforce needed is being sourced more frequently from outside the EU as Ireland’s elevated cost of living makes it less appealing to EU workers.
Continuing to promote job growth in an already fully employed economy may result in siphoning away workers from other critical sectors of the society and economy. Balance might be achieved with time through changing wage rates, though there may be adverse reactions to such the adjustment. To secure professionals like psychologists or engineers, the public sector may necessitate a compensation increase, especially if there are competitive well-paid positions being created elsewhere.
The sourcing of the required workforce to scale up investment in essential infrastructure and housing remains a complex task. Despite employment in the Irish construction sector dropping by 5% in the previous year, this was moderated by involvement of construction workers from other nations. The valuable role these foreign workers play in meeting our investment needs cannot be ignored. However, they also need a place to live, when the availability of housing remains critically low. Therefore, it is crucial that more individuals residing in Ireland consider a career in construction.
Greater emphasis needs to be placed on encouraging youths to take up training in this field along with conventional trades like block-laying. It is also pertinent to focus their training on modern construction techniques such as the manufacturing and assembly of prefabricated timber panels. To vie with the multitude of alternative career options in other sectors, construction pay rates may need to be reconsidered.
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