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Irish growth expected to continue at a more moderate pace than recent years

Written by Robert McHugh, on 3rd Jun 2024. Posted in Economy

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The domestic economy In Ireland is expected to continue to expand at a robust pace, underpinned by employment growth and a renewed rise in real wages as inflation normalises, according to the latest inaugural AIB Economic Outlook.

A more moderate pace of economic growth is expected this year, with gross domestic product (GDP) and modified domestic demand (MDD), a less volatile gauge of domestic activity, expected to grow by 2.4% and 2.2% respectively following several years of rapid growth.

'Continued Growth'

“Our latest forecasts point to continued growth in the Irish economy in the coming years," said David McNamara, AIB Chief Economist.

"However, this growth will be more moderate than the exceptional pace of recent years as the economy bounced back from the pandemic."

Domestic Price Pressures

The outlook shows that inflation has returned to its normal range and is expected to remain there for the near term, with the annual harmonised index (HICP) of consumer prices expected to fall to 2.2% for 2024 from 5.2% last year, and to 1.9% and 2% in 2025 and 2026.

Despite this, AIB warns that Ireland remains exposed to movements in international commodity prices and domestic price pressures in capacity-constrained domestic services sectors

Strong Population Growth

The Report expects unemployment to remain close to the current low levels, with employment to top a record 2.8 million people by 2026.

This is as a result of strong population growth and the female participation rate surging since the pandemic, rising to 60.5% of the working age population in Q1 2024 from 56.4% in Q4 2019.

Flexible Working

The introduction of flexible working since the pandemic may have driven the increase in female participation.

However, there are signs this exceptional growth will cool as the labour market nears full capacity.

'Risks'

"The Irish economy continues to create jobs, and inflation has returned to normal ranges," said McNamara.

"However, the globalised nature of the Irish economy means we remain exposed to international macro and geopolitical events and the risks to the outlook are tilted to the downside at present.”