Cheer Up And Never Mind The Doomsayers
Over the past 40 years the Irish economy has proven itself to be not only one of the fastest growing in the world but also one of the most resilient. That resilience is likely to once again be brought to bear in 2023, allowing us to record modest growth while the developed economies around us fall into recession.
We sometimes lose sight of our core strengths. Many of us have spent so long waiting for a recession we just knew was around the corner that it can be difficult to accept it is unlikely to happen or, rather, that it will happen, just not in Ireland.
We have spent so long telling ourselves that we are a small open economy that we sometimes forget we have a habit of bucking international trends. Naturally, there is a risk that our economy contracts in 2023, but even if it does our remarkable ability to bounce back will kick in.
We bounced back from the dot com bust in the ’90s, we bounced back from the global financial crisis, and we bounced back from Covid. The Celtic Tiger lives on. Faced with the extraordinary performance of the Irish economy, doomsayers will tell you that we are too dependent on multinational companies, and that you have to strip out their contribution to see how Ireland is really doing.
Multinationals are the main reason why the corporation tax take this year is likely to come in at €23bn, almost six times what was generated in the years pre-2014. We
are only ‘too dependent’ if we assume the corporation tax train will trundle on forever and plough the money into day-to-day spending. Instead, we have uncoupled a few carriages and shunted them to a rainy–day siding, while also using the windfall to fund once–off supports such as the €1.25bn Temporary Business Energy Support Scheme.
Such supports, along with energy subsidies for consumers and extra social welfare handouts, should help insulate SMEs from the worst of the energy crisis into spring 2023, when prices are likely to taper off. It is great that we can afford these supports though there is a real danger we become addicted to bonanza money, or rather that our political masters find it difficult to turn off a very popular tap.
We have seen it already in the decision to extend by a full year the tax warehousing arrangement. Keeping distressed SMEs on life support may seem merciful but it puts competitors who pay their taxes at an unfair disadvantage.
Ahead of Christmas, most consumers are expecting to spend at least as much if not more on presents compared to last year. The Irish consumer is a much less fragile creature than the one that entered the financial crisis, which is just one more reason not to fear a recession in 2023, even if one were on the cards.