Ireland’s economy expected to experience growth over the next two years

ESRI Forecasts Strong Growth for Ireland’s Domestic Economy in Next Two Years, With Inflation and Infrastructure Bottlenecks Being Key Challenges

The Economic and Social Research Institute (ESRI) has projected that Ireland’s domestic economy will experience strong growth in the next two years. Modified Domestic Demand (MDD), a measure of domestic economic activity, is expected to increase by 2.3% this year and 2.5% next year, providing a more accurate representation of the country’s economic performance.

Inflation and higher interest rates led to a slow growth rate of just 0.5% for MDD in 2022, as spending and investment were affected. However, the economy recovered strongly from the pandemic in 2023, only to slow significantly due to higher inflation putting a strain on households and limiting real pay growth. Real pay, adjusted for inflation, is an important measure of changes in living standards and is essential for economic growth and stability.

Gross Domestic Product (GDP) is typically used as a measure of economic performance, but it is heavily distorted by multinational activities in Ireland. In 2023, Irish GDP actually shrank by 3.2%, reflecting the impact of US pharmaceutical firms coming off their pandemic highs. The ESRI anticipates a rebound in Irish GDP over the next two years as global trade improves.

The think tank highlighted infrastructure bottlenecks as a critical challenge for Ireland’s economy moving forward. This includes issues related to housebuilding, renewable energy, and public transport. For example, plans for an underground rail link between Dublin Airport and the city center have been in the works for over 20 years, underscoring the need for timely and efficient infrastructure development to support economic growth and prosperity in Ireland.

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