A fall in exports and lower consumer spending in the face of higher inflation will lower the growth rate in the economy this year, according to the Economic and Social Research Institute.
In its latest Quarterly Bulletin, the think-tank also cautions against any cuts in taxes in the upcoming Budget that go beyond keeping pace with inflation.
The knock-on effect on multinationals exporting from here is a forecast fall in GDP this year of 1.6%. However, forecast growth in the domestic economy has also been downgraded slightly. One reason is the effect inflation is beginning to have on consumer spending. Also, higher interest rates are reducing investment.
This is where the costs of other goods and services catch up with the"shock" caused by the dramatic increase in energy prices last year. Also, the price of oil has steadily risen since the summer.Speaking at a press briefing, Kieran McQuinn, Research Professor with the ESRI, said it would be"a good idea" for any government that outlined a spending rule to stick to it and it would"not be a healthy sign" if it didn't.
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