Some economists and bankers are warning that the US economy and the global economy will enter recession by the middle of 2023.
The Central Bank and employers body Ibec have also downgraded their growth outlooks for Ireland, but are still predicting economic growth next year.
Simon McKeever, the CEO of the Irish Exporters Association, said the fortunes of Irish firms exporting to the UK rely on two things – the rate of exchange between the euro and sterling, and sentiment among British consumers.
Sterling rose by 0.52% today though that did little to erase its 2% slide overnight after a sobering assessment of Britain’s growth outlook and a shift in tone from the Bank of England on rate expectations.
The pound was also headed for a weekly loss of more than 3%, the largest since September’s market turmoil triggered by an economic plan that alarmed investors.
While the Bank of England raised interest rates by the most since 1989 yesterday, it warned investors that the risk of Britain’s longest recession in at least a century means borrowing costs are likely to rise less than they expect.
Mr McKeever said the news coming out of the UK was “very grim” and that the effect of Brexit has not been factored in to Britain’s economic analysis.
“We’ve seen the same increase in interest rates most recently in both the European Central Bank, the US, and now in the UK – so they’ve all reacted in the same way on interest rates,” he said.
He said yesterday’s movement between the euro and sterling will probably reverse itself today.
But he added he would be “very very concerned” if the value of the euro was to approach 90 pence again.
“On top of the energy prices that companies are paying at the moment, an increase in the price of the euro against sterling would be very disadvantageous at the moment,” he stated.
“We are indelibly linked to the UK market, it is extremely important for us, for smaller companies, for indigenous Irish businesses, it’s still where 10-11% of our exports go to – so if there was to be a long recession in the UK it’s not good for us,” he stated.
He said that Ireland has done “remarkably well in dealing with Brexit” and that the UK has not.
He also said that the US, the UK, and the European Union are facing very similar risks in terms of the energy prices and inflation, but unlike other countries, the UK has also to deal with the issue of Brexit.
The UK will have to deal with the issue of Brexit that over the next three to five years – or even longer – he added.
Simon McKeever also said the war in Ukraine is in the back garden of the European Union, the back garden of the ECB, adding that Europe is probably more prone to the war and the risks that are associated with that in Ukraine.