ESRI Predicts Steady Domestic Growth for Ireland’s Economy Despite Inflation and Infrastructure Challenges

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

The Economic and Social Research Institute (ESRI) has predicted that Ireland’s domestic economy will experience solid growth in the next two years, with modified domestic demand (MDD) expected to increase by 2.3% this year and 2.5% next year. MDD is a measurement that eliminates the impact of multinational companies on Ireland’s economy, providing a more accurate representation of domestic economic activity.

Despite strong recovery from the pandemic, inflation and higher interest rates affected spending and investment in 2023, leading to a slow growth rate of just 0.5% for MDD. Real pay, adjusted for inflation, is an important measure of changes in living standards, and it is essential for economic growth and stability.

Gross Domestic Product (GDP) is the typical 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 the importance of addressing 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.

Inflation has had a significant impact on households’ ability to make ends meet due to higher interest rates affecting spending and investment in 2023 leading to slower growth rates for MDD at just 0.5%. However, despite these challenges, real pay growth has remained stable due to adjustments made for inflation.

The ESRI predicts that Irish GDP shrank by 3.2% in 2023 due to US pharmaceutical firms coming off their pandemic highs which heavily distorts traditional measures such as GDP.

To support economic growth moving forward

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