Ireland’s economy is expected to grow throughout this year and into 2025, a report shows.
The Economic and Social Research Institute (ESRI) said it anticipates growth in all economic activity indicators.
It states that Modified Domestic Demand (MDD) will grow by 2.3 per cent this year and 2.5 per cent in 2025 while it anticipates GDP, heavily influenced by the multinational enterprise (MNE) sector, to grow moderately at 2.5 per cent this year and 2.3 per cent 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 over the past two years.
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 to increase by 2.3 per cent in 2024 and 2 per cent in 2025. This is compared with 6.3 per cent 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 per cent in 2024 and 4.2 per cent in 2025.
While the outlook for the Irish economy is positive over the medium term, the ESRI said it is clear there are a number of challenges which need to be considered.
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.
Author Professor Kieran McQuinn, of the ESRI, said: “Unlike 2023, we expect all major indicators of economic activity to register positive growth in 2024 and 2025 indicating likely stable growth over the period.”
Dr Conor O’Toole, of the ESRI, added: “Consumer prices have increased very rapidly over the past number of years, creating notable challenges for many households.
“However, we expect prices to rise at a much more modest pace for 2024 and 2025.”
