Quarterly Economic Commentary, Spring 2024

The Irish Economy – Overview

• While MDD and headline indicators such as GDP and GNP reported differing accounts of the direction of change in Irish economic activity in 2023, we expect growth across all main indicators of activity in 2024 and 2025.
• We now believe MDD will grow by 2.3 per cent in 2024 and by 2.5 per cent in 2025. The unemployment rate, another key indicator of underlying growth in the economy, is set to fall to 4.3 per cent in 2024 and to 4.2 per cent in 2025.
• The labour market continues to perform robustly and is now operating close to capacity. In addition, inflation is expected to decline throughout 2024 with a return to growth in real incomes. 
• A critical challenge in managing the Irish economy in the period ahead will be dealing with the well documented infrastructure bottlenecks in an economy operating at capacity. Box D in the Commentary by FitzGerald and McQuinn notes a low level of investment to output (adjusting for multinational distortions) when compared to other countries. The pace and scale of required investment will have to be cognisant of broader capacity constraints apparent in the economy. 
• The domestic economy will inevitably be influenced by global developments in 2024 and 2025. To that end, O’Toole, in Box C, discusses the global outlook focusing in particular on the downside risks. Internationally, growth rates are stabilising and disinflation is occurring somewhat more quickly than expected. If these conditions continue, it is likely to allow monetary authorities space to moderate official policy rates. However, geopolitical tensions and their impact on global trade flows add notable downside risk. 
• The Commentary contains a number of Boxes focussing on the Irish residential market; McQuinn examines the likely future trend in the user cost of capital for housing, while Hauser focuses on the degree of ‘under-occupancy’ in the Irish market compared with other EU countries.