Economy expected to grow in 'robust fashion' into 2025

Muireann Duffy

The Irish economy is expected to grow "in a robust fashion" in 2024 and 2025, according to the ESRI.

In its latest quarter economic commentary, the institute says headline and underlying indicators suggest the economy will perform well over the coming months, driven by a "better-than-expected international outlook and robust domestic growth".

Modified domestic demand (MDD), which is a measure of domestic economic activity, is expected to grow by 2.2 per cent this year, and 2.5 per cent in 2025, prompted by an increase in real income of an estimated 3 per cent.

The ESRI predicts inflation will continue to slow, dropping to 2.3 per cent for 2024 and then further to 1.9 per cent next year, while unemployment is likely to follow a similar trend, decreasing from 4.1 per cent to 4 per cent.

Among the factors which pose a risk to the projected economic growth are "continued tensions in the geopolitical situation" in Europe and Asia, the ESRI notes, adding, if escalated, these tensions "could have significant implications for a small open economy such as Ireland's".

The commentary also describes the issue of 'capacity constraints' as "critical", noting: "Recent data from the Housing Commission suggest an upward revision in house supply targets will be needed to cater for demographic demand for housing".

The ESRI acknowledges that while housing supply is on an "upward trajectory", the pace at which housing is being delivered must increase in order to meet demand.