World Economic Climate Cools Down

While assessments of the current economic situation deteriorated compared to last quarter, expectations remained positive.

Although at a global level economic sentiment is relatively positive, there has been some concerning deterioration. While sentiment remains relatively high in Europe and the US, Ireland’s major trading partners, future expectations have diminished. The index has already dropped below its long term average in both Asia and Africa. The prospect of reduced global demand, particularly in the wake of recent uncertainty as to the future economic performance of China, will be a worry for an open economy like Ireland.

According to the Ifo World Economic Climate Survey, the economic climate deteriorated in almost all regions. Nonetheless the indicator in Europe and North America still remained at a relatively high level, while it sank below its long-term average in Asia and Africa. The index continued to fall in the Middle East and Oceania, dropping to its lowest level in six years. In the CIS states and Latin America, however, the indicator’s descent ground to a halt, with a slight recovery seen in both regions.

These results serve to reinforce the point that for Ireland’s economic recovery to be sustainable in the longer term, we need to retain focus on maintaining our competitiveness. Our rising cost base has already been flagged by the National Competitiveness Council as a threat to our future economic growth, and if global demand becomes constrained, there is a real risk that our export led recovery will halt. Controlling costs to businesses will need to be a key area of focus of Ireland’s economic policy in the near term.

Since 1981 the Ifo Institute has conducted a quarterly survey of business experts across numerous countries on business cycle developments and other economic factors in the experts’ home countries. The July 2015 survey received responses from 1,101 experts in 117 countries.

Chambers Ireland is one of the nominated business experts for the Ifo Institute.

The full report can be read here: