Reason to believe State’s technical recession has passed, says KPMG

There are “reasons to be optimistic” about the State’s economic outlook for 2024, with GDP growth of up to 3 per cent on the cards, according to a new report from KPMG.

The economic outlook report published by the professional services firm on Thursday concludes there is reason to believe that Ireland’s technical downturn has passed, and modest growth can be expected next year.

KPMG expects to see modest Irish growth over the coming years as “consumption recovers with rising real wages, subsiding price pressures” amid a “strengthening in investment and exports as external demand picks up”.

Forecasted growth for Ireland for 2024 is ahead of the 2.2 per cent growth which KPMG predicts globally in 2024.

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The report says that Ireland’s domestic economy was the primary driver of growth in 2023, contributing to the creation of more than 100,000 jobs.

In 2023, modified domestic demand (a measure of the domestic economy which excludes multinational activity) continued to grow, albeit at a more moderate pace as high inflation curbed spending by households and businesses.

At the same time, a slowdown in global demand triggered marked reductions in export volumes. In a note of caution, KPMG warned that export-facing businesses need to prepare for challenges in 2024 as global trade complexities could “hamper Ireland’s growth potential”.

KPMG economist Daragh McGreal said that the volatility of corporation tax receipts this year indicates that “more cautious budgetary policy may be required”, in the face of “significant levels of investment needed over the coming years across infrastructure, housing, healthcare and renewables to meet the demands of a growing population and economy”.

The report also noted that the European Central Bank’s (ECB) tightening of monetary policy since 2022 is slowly eating into inflation, which remained elevated throughout 2023 but gradually fell over the course of the year.

Mr McGreal said that the central outlook for next year is a “gradual easing in energy prices and a restoration of real incomes to pre-2022 levels”, although he noted that retail energy prices are likely to stay elevated and vulnerable to further volatility.

Inflation is now being driven by higher housing and food costs, which are in turn dragging on domestic consumption, according to the outlook.

Looking at real estate, the report notes that the State’s residential property market slowed in 2023, with competing forces of a continued lack of supply and increasingly stretched affordability leading to a levelling off of growth.

After a marked increase in housing completions in 2022, and weathering of supply pressures in 2023, the report sees “an indication of further growth in 2024″, while Ireland’s commercial property market is expected to recover in 2025.

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