Irish economic growth still quite strong but multinational activity slowing, says ESRI

By Gráinne Ní Aodha, PA

The domestic growth of the Irish economy remains “quite strong”, according to the Economic and Social Research Institute think tank.

ESRI’s latest Quarterly Economic Commentary says continued economic growth is expected in 2023 and 2024, and there will be “a significant moderation” in the inflation rate as price pressures begin to ease, particularly in the energy market.

It forecasts that modified domestic demand (MDD), a way of measuring Ireland’s domestic economic activity, will grow by 3.6 per cent this year and 4 per cent in 2024.

With the unemployment rate at a low of 3.8 per cent as of May, it said it expects it to average at below 4 per cent both this year and next.

Continued growth is also expected in the public finances, with taxation receipts in the first five months of the year already 10 per cent above their level in 2022.

Despite this strong showing, it said there will be a “slowdown in multinational activity” due to high interest rates, affecting global activity and investment decisions.

Higher rates are also expected to contribute to some moderation in investment activity and a cooling of housing and mortgage demand.

Reduced global demand is also expected to affect exports, which will increase at a reduced pace, largely due to declines in pharma-related goods.

“Any further contraction in the pharma or ICT sectors may lead to downward revisions in export growth and lower the growth outlook,” ESRI said.

Author Kieran McQuinn said: “The Irish economy is set to experience sustained growth in 2023 and 2024, however, global uncertainty will exert negative pressures on the domestic traded sector.”

Author Conor O’Toole said: “The domestic economy is continuing to grow robustly and the labour market is particularly buoyant.

“This is likely to lead to challenges in sectors such as construction and risks exerting upward pressure on general prices and wages.”