Quarterly Economic Commentary, Autumn 2024

The Irish Economy – Forecast Overview

• Despite a significant decline in headline investment levels in Q2 2024, the underlying pace of growth in the Irish economy is set to be robust this year and next.
• Modified domestic demand (MDD), which is the preferred indicator of output growth, is set to increase by 2.3 per cent in 2024 and by 3.1 per cent in 2025.
• The Irish labour market continues to perform in a very strong manner with the unemployment rate set to converge back to 4 per cent over the next year, which is quite remarkable given the significant increase in population which is currently being experienced.
• Much of this increase is coming about through increased net migration. Given recent political and social developments, the Commentary argues it is important that the contribution of immigration to Ireland’s continued economic success is acknowledged. 
• Given the proximity of the Budget, the Commentary, in a Box prepared by McQuinn and Walsh, examines the sustainability or otherwise of recent and future expected increases in Government expenditure.
• The Box concludes that future expenditure levels are still on a sustainable path once the scale of the economy is allowed for. However, the significant increase in Government spending necessitates the identification and monitoring of indicators which aim to track productivity and efficiency gains in key areas of public policy such as healthcare.
• The Commentary cautions against any delay in the adoption of the proposed residential zoned land tax (RZLT). This measure has been identified as one way of targeting land hoarding in the residential market. Reducing the cost of residential land is one practical way the Government can improve the efficiency and productivity with which housing is supplied to the market.