Is a recession coming soon and how will this affect employment in Ireland?
In a word “unlikely”, that’s according to Gabriel Makhlouf the Central Bank Governor. As fears around a recession grow due to global economic factors such as the war in Ukraine, inflation, and rising interest rates. The Central Bank Governor believes that its “unlikely” that Ireland will enter into a recession when responding to a reporter on the risk of the State falling into recession, as he presented the bank’s semi-annual Financial Stability Review (FSR).
At the Financial Stability Review (FSR) the Central Banks director of economics and statistics Mark Cassidy weighed in on the conversation stating that “it’d take quite a significant further negative shock” to force the Irish economy to contract even as the outlook has weakened.
Their comments come as reassurance as the memory of the last recession of 2008 is still fresh especially to those in the construction industry. However, the reassuring comments of Mark Cassidy the Central Banks director of economics and statistics and Gabriel Makhlouf the Central Bank Governor come from reading into statistics and facts.
Here are some of the facts and statistics why we believe that there won’t be a recession in 2022 or 2023.
In 2022 Irelands unemployment rate is at 4.7% which is where the country was in 2019 and at the start of 2020. This means as a nation Ireland is close to full employment. The last time Ireland’s unemployment rate fell below 4.7% was in November 2006.
Last month the CSO published figures that showed the number of people in employment is at 2.5 million. According to CSO Ireland has reached record levels of people in employment and has pushed “well beyond” the levels before the onset of the Covid-19 crisis.
The website Indeed.com, carries more jobs than any other jobs website in Ireland. One statistic that really jumps out at us is that there were 57% more jobs on the platform in May of this year compared to that of February 2020 (pre Covid-19)
At the start of the year the economy had a strong start to 2022. There is no doubt that the war in Ukraine has had an impact on our growth, so the Central Bank of Ireland has amended the country’s growth expectations. As a result, modified domestic demand growth has been revised down to 4.8% in 2022, 4.3% in 2023 and 3.9% in 2024. These are still strong growth projections and a long way off from recessionary projectons.
The Central Bank of Ireland forecasted exports to grow by 8.0% in 2022, 6.2% in 2023 and 6.0% in 2024. It is predicted that people will continue to spend as consumption is forecast to grow by 7.4% this year, slowing to 4.7% and 3.9% in 2023 and 2024.
The inflation rate is high at the moment as it is expected to average 6.5% this year, with wholesale energy prices the primary factor driving inflation at present. However, it is forecasted that inflation will slow to 2.8% in 2023 and 2.1% in 2024, however this is highly dependent on the fallout from the war in Ukraine.
Recession in 2023 unlikely but not impossible
In a worst-case scenario Ireland enters into a recession, our economic growth slows down along with our jobs market and spending slows down also. However, Ireland is far better equipped to deal with a recession than in 2008, here are some of the differences
The banks are heavily funded, no more 100% mortgages, a property crash like 2008 is highly unlikely as banks are well financed and demand is through the roof. Our government will continue to invest in the construction industry with multi-billion euro plans to improve Ireland’s housing system and deliver more homes of all types for people with different housing needs. To deliver this plan the government will be relying on construction engineers, site managers and trades people, even if we do dip into recession.
Data Centres Evolution
In 2019 it was reported that €4.5 billion will be invested in the creation of thirty four new data centres by 2025. According to Niall Molloy, CEO of Echelon
““Data centres are essential infrastructure – now, post-pandemic, more than ever. If we are to continue to benefit from low-cost, reliable and time-saving tech such as Zoom and Teams, if we’re to enjoy the speed of 5G, if we are to stream on demand and if we are to look forward to the future of AI and the IoT, then increasing data centre capacity is a given.”
Echelon is an Irish owned data centre infrastructure developer who recently received €855m in funding to complete four Irish data centres.
With a huge number of sanctions imposed on Russia (one of the largest oils suppliers in the world) the demand for renewable energy will soar. However, infrastructure for renewable energy such as wind, hydro and solar are not fully utilised in this country and presents a huge opportunity to develop this even further.
Ireland’s Climate Action Plan has ambitions to generate significant renewable energy production from wind resources in the coming years. A major focus of the plan will be to decarbonise the electricity system to 80% by 2030.
Ireland has also signed Climate Action and Low Carbon Development Act 2021 meaning Ireland is now on a legally binding path to net-zero emissions no later than 2050. It also means that more funding, resources, and jobs will be committed to this area as Ireland needs to reduce emissions by 51% by 2030.
Pharma & Medical Device Production
According to atradius Ireland stands out as the strongest performing market in the industry. It’s a relatively small country but accounts for more than 5% of global pharmaceuticals production. It surged to 25% growth in 2021 and will benefit from ongoing vaccine production demands.
This growth is expected to continue and the same can be said about the medical device industry as global annual sales forecast to rise over 5% by 2030 and reach US$800 billion according to KPMG . Ireland hosts significant players in this industry that supports many jobs, and this will come as welcome news to those in the industry.
What does this mean for Ireland’s STEM professionals?
If an “unlikely” recession happens engineers and scientists in manufacturing, construction, pharmaceuticals, and medical devices have some of the most secure professions in Ireland.
Engineers are in high demand right now and they will be in more of a demand in the coming years as government construction projects need to be completed, data centres need to be completed also. The demand for renewable infrastructure is growing at unprecedented levels and pharma and medical device production is growing at a rapid pace.
With this in mind we hope that we have put your mind at ease as there is a lot of commentary about a looming recession from “celebrity” economists. The fact is recession and economic booms are part of a developed economies economic cycle.
An economist stating that there is going to be a recession is similar to a weatherman stating that it’s going to rain. It will rain and recessions do happen however neither the weatherman nor the economists can tell you when it will happen with 100% degree of certainty.
If you’re anxious about moving roles because of speculation about the economy or after reading this article you are energised and optimistic about your future career, get in touch with on of our team here in STEMRP.ie