Irish economy expected to resume strong growth path in 2024, predicts EY

Consultancy’s latest economic outlook suggests economy and labour market to expand after slowdown in 2023

The Irish economy is expected to grow solidly this year, outperforming most peer economies, as “inflation tracks lower and the interest rate cycle turns”, according to consultancy EY’s latest economic outlook.

After five successive quarters of declining GDP (gross domestic product), EY said it expects GDP to rise by 2.2 per cent this year and 3.8 per cent in 2025 while Modified Domestic Demand, a better gauge of domestic activity, is expected to grow by 2.2 per cent in 2024 and 2.5 per cent in 2025.

The company also projects further job growth, with employment expanding by 1.6 per cent in 2024 and 1.8 per cent in 2025. “The labour market is very strong, with record numbers currently in employment,” it said.

Inflation is also projected to moderate after the highs of 2022 and early 2023 with EY forecasting headline price growth to average 3 per cent in 2024. It also noted that businesses, exporters and some mortgage holders could expect interest rate cuts at some point in 2024. The group also forecast a modest expansion for the Northern Ireland economy.

READ MORE

EY’s report also highlighted the “strong” performances of the island’s two labour markets, noting the number of people employed in the Republic rose to a record high of 2.66 million last year. Despite layoffs in some high-profile tech companies, IT jobs were still up and over 300,000, it said.

Vision Capital vs IRES REIT: trouble brewing at Ireland’s largest private landlord

Listen | 33:13

“After stellar economic growth in Ireland in 2021 and 2022 and some normalisation in 2023, we are looking at reasonably solid growth in 2024,” EY Ireland chief economist Loretta O’Sullivan said.

“While the international economic environment is still relatively subdued and tighter monetary policy is biting, disinflation is helping to restore households’ purchasing power,” she said.

“Economic momentum is expected to build as the European Central Bank and the Bank of England begin to loosen monetary policy and financing conditions for business investment become more favourable and as trading partner demand improves. With all of this in mind the outlook for 2025 is stronger,” said Ms O’Sullivan.

“The Irish economy has many strengths but to keep pace with global markets we also need to cultivate the seeds of future economic growth by training and upskilling our workforce, investing in necessary infrastructure, accelerating the green transition and harnessing the transformative potential of new technologies such as Artificial Intelligence,” she said.

EY’s report also highlighted the risks attached to worsening geopolitics.

“While there is much to be positive about, a number of global headwinds remain. Geopolitical tensions are high, particularly with the continuing war in Ukraine, the Middle East conflict and the recent attacks on shipping in the Red Sea, which are disrupting global supply chains,” said Ms O’Sullivan.

“With over half of the world’s population eligible to vote in elections in 2024, it is also a year of significant electoral change which brings a level of uncertainty,” she said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times