How resilient is the Irish economy?
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What is the main topic discussed in this episode?
News Talk Breakfast with Anton Savage in association with AIR. Whatsapp us 087 1400 106 or email clareburn at newstalk.com. Now the ESRI is warning today that food prices may well increase again later in the year. They also warn that though the economy is doing well, spending will have to be tightly controlled in the face of international uncertainty and ahead of the public sector pay negotiations which are coming down the track. Alan Barrett is Research Professor at the ESRI and he joins me now. Good morning Alan.
Morning, Clare.
So first to the good news, you are happy the economy is doing well, despite all of that international uncertainty around.
Absolutely. I mean, for quite a while now, it seems we've been talking about sort of international challenges and international uncertainty. But one of the remarkable features of the Irish economy over the last sort of, you know, 10 years is the fact that the economy continues to to grow. So looking ahead for the remainder of this year and into next year, we see the economy growing. We use the measure modified domestic demand. We won't get too technical or boring about it, but it's, you know, it'll grow by about 2.6% this year, 2.8% next year. That will translate into sort of ongoing employment increases.
What warning does the ESRI give about food prices?
So yeah, in spite of all the headwinds, in spite of all the difficulties, we do see growth in the economy. But we do see a couple of challenges as well. So I don't know. Do you want to move on to the challenges?
Listen, we'll talk about those because I think that the headline one that people are talking about this morning is this warning that food prices may increase later in the year. Now, we have seen Brent crude drop again overnight to lower than what it was before the conflict started. Does the warning still stand?
I'm afraid it does. So we have conducted sort of analysis here because we were trying to get a sense of the extent to which the fuel price increases. How do they follow through into other areas of the economy? And of course, it's not just fuel prices that have increased. Fertiliser prices have increased and there's sort of a whole range of other things. So it's obviously good news that things seem to be moving in the right direction in the Middle East and with the oil price. But you do have these sort of lagged effects. And essentially what the analysis showed is that sort of historically, if you look at, you know, when energy prices have spiked, increased or whatever like that, the impact on food prices can be about sort of eight or ten months later.
And there's a variety of reasons for that, even if you sort of think about something as simple as, you know, well, when does planting happen? And, you know, say if planting is lesser than it otherwise would have been, you can have these sort of longer run effects. So the concern here is that even though we, you know, we expect the energy price increases to sort of moderate, those longer run effects can still be there, whereby sort of inflation for the year we think will average around sort of 3.5% to 4%. There'll still be inflation, it looks like, in the system next year. So it will ease, but the government is going to have to sort of keep monitoring this sort of situation. And of course, on the specifics of food prices, we just know that because food price inflation tends to affect people in lower parts of the income distribution more because the higher proportion of their spending on food, that that's always a specific concern.
What about housing?
What indicators show that the Irish economy is performing well?
Because you have revised upwards the number of homes that you expect to see built this year and next. And that'll be good news, of course, for all of the people who desperately need a home. But then you express a concern that house building might slow. So what's informing that?
Well, there's two dimensions. I mean, firstly, you're right. I mean, it is a welcome development that the housing completions seem to be increasing. Of course, the difficulty is that they're not really increasing at the rate that we need to see.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:01–1:23
2
What warning does the ESRI give about food prices?
1:23–3:29
3
What indicators show that the Irish economy is performing well?
3:29–7:42
4
What challenges does the Irish economy face despite growth?
7:42–11:28
5
How do energy price increases affect food prices?
11:28–11:47
Speakers
2 identifiedMore from The Claire Byrne Show
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