M10news– Ireland’s economy is forecasted to maintain its growth trajectory over the next 18 months, with households experiencing a rise in real wages, according to the Economic & Social Research Institute’s (ESRI) latest quarterly economic commentary.
The ESRI, an independent research institute, attributes this positive outlook to a favourable international environment, faster-than-expected disinflation, and low unemployment rates.
The report projects that GDP, driven mainly by multinational enterprises, will grow by 2.5% this year and 3.2% in 2025.
Kieran McQuinn of the ESRI highlighted that, for the first time in two years, Irish households are expected to see an increase in real wages in 2024 and 2025. “This will support increased consumption levels in the domestic economy,” McQuinn stated.
The report also noted that Modified Domestic Demand (MDD), considered a more accurate measure of Ireland’s underlying economic performance, grew slower in 2023 due to lower investment rates. However, MDD is anticipated to grow by 2.2% in 2024 and 2.9% in 2025.
Inflation Trends
The ESRI report indicates that inflation in Ireland is decreasing, with the Consumer Price Index (CPI) inflation expected to rise by 2% in 2024 before dropping below 2% in 2025.
This, combined with rising nominal wages, has led to real wage growth for the first time in two years. Real wages are projected to increase by 2% in the current year and 3% in 2025.
“The Irish labour market remains strong,” the report notes, “with employment surpassing 2.7 million workers for the first time in modern history and unemployment at 4%.” This suggests that the labour market is operating at total capacity, with limited potential for further growth without inward migration.
Potential Risks
The report also outlines potential risks to Ireland’s economic outlook, including geopolitical tensions in Europe and Asia and challenges in maintaining investment levels amid capacity constraints.
Co-author Conor O’Toole commented, “Ireland’s economy is likely to benefit from a more benign international outlook and a robust domestic performance.
A main challenge will be addressing capacity constraints through investment without adding to price pressures.”
Overall, the ESRI report paints a positive picture of Ireland’s economic future, highlighting key growth areas and potential challenges.
