Economy expected to grow this year and next

IRELAND’S economy is expected to grow throughout this year and into 2025, a new report shows.

The Economic and Social Research Institute said it anticipates growth in all economic activity indicators.

It states that modified domestic demand will grow by 2.3% this year and 2.5% in 2025 while it anticipates gross domestic product, heavily influenced by the multinational sector, to grow moderately at 2.5% this year and 2.3% in 2025.

The ESRI said these developments are driven by two factors. ‘First, we expect an improvement in the performance of the traded sector of the economy which had seen a decline in 2023,’ the report states. ‘Second, we expect the domestic economy to continue to post modest growth for the coming two years.’

The increase in the cost of living has been one of the major challenges facing the economy and the report states that, overall, the inflation rate is decreasing, primarily driven by the decline in energy prices. The ESRI said it expects this trend to continue and for consumer price inflation of 2.3% in 2024 and 2% in 2025. This is compared with 6.3% inflation in 2023.

The labour market continues to perform robustly and is now operating close to capacity. With the expected decline in inflation in 2024, the ESRI expects a return to growth in real incomes.

Unemployment is expected to average 4.3% in 2024 and 4.2% in 2025.

While the outlook for the economy is positive over the medium term, the ESRI said it is clear there are a number of challenges. These include geopolitical tensions and their impact on global trade flows, dealing with infrastructure bottlenecks in an economy operating at capacity, and efficiently managing a small open economy with a very large multinational component.