Irish GDP to increase by 2pc this year, says Ibec forecast

Irish GDP will grow by 2pc this year and by 3.4pc next year, according to the latest quarterly economic report from Ibec, the business lobby group.

Higher growth in exports and investment is expected both this year and in 2025, on the back of falling inflation, the expected reduction in interest rates, and marginal improvements in the global economy.

The Ibec report finds, however, that consumer sentiment is still not strong, with households remaining nervous about rising prices.

“While sentiment has bounced back from particularly poor readings a year ago, it remains below its long-run trend and has begun to decline again marginally over the opening months of 2024,” it says.

“Across the EU as a whole, there is a similar divergence between increasingly positive sentiment around households’ own financial circumstances and a slower recovery in assessments of the economic performance in their country.”

Personal consumption expenditure plateaued in the last quarter of last year, as households moderated their spending in light of rising costs, the report says.

Spending on credit and debit cards so far this year is up 29pc, with consumers spending a total of €15.4bn. Online transactions accounted for a little over half of this, underlining the long-running trend towards online shopping.

Following three years of double-digit growth in exports during the pandemic, there was a 4.8pc fall last year in the export of goods and services from Ireland.

This was partially due to declining sales of Covid-related products, such as vaccines, from the biopharma sector.

Ibec’s forecast is for exports to increase this year, by up to 3.6pc, helped by a marginally stronger performance in the global economy.

Gerard Brady, chief economist with Ibec, said: “Headline economic figures for last year bely a robust performance on the ground, with 90,000 jobs added and a domestic economy that compares favourably with much of Europe.”

Mr Brady’s prediction is that falling inflation and the expected cut to interest rates should boost the Irish economy this year. “For consumer-facing businesses, the fall-off in inflation to 2.3pc in 2024, combined with high employment and rising wages, will mean a return to real income growth for households, even though prices facing consumers will remain higher than previous years due to higher global commodity costs.”