“Ireland’s Economic Growth Faces Forecasted Slowdown”
Dublin— The Central Bank’s latest report indicates a tempered outlook for Ireland’s domestic economy, suggesting that the anticipated economic boom may not materialise over the next three years. Instead, the forecast points to moderate growth, with various factors contributing to a slight reduction in overall economic expansion.
Factors such as escalating political tensions, prolonged slowdowns in the pharmaceutical and tech manufacturing sectors, subdued demand from key trading partners, and domestic supply constraints are cited as impediments to robust economic growth. Additionally, fluctuations in interest rates, developments in the pharmaceutical and ICT sectors, and ongoing constraints within the domestic economy are highlighted as potential barriers to growth through 2026.
The report underscores a downward revision in the country’s Modified Domestic Demand (MDD) growth, from an initial forecast of 2.5% to 2.2% for the current year. While subsequent years are expected to see modest growth, with MDD projected to reach 1.9% in 2025 and 2% in 2026, GDP growth is also anticipated to be sluggish in the coming years, despite a marginal increase of 2.8% in 2024.
Notably, the Central Bank predicts a faster-than-expected decrease in inflation for the current year, with the Consumer Price Index forecasted to average 2% in 2024 before declining to 1.8%. This decline is attributed to lower energy prices and the normalization of supply chains. However, the report warns of sustained inflationary pressures in the domestic market, particularly in energy and food prices, which are expected to remain elevated until 2026.
Despite operating at full capacity, the labour market may experience supply shortages in certain sectors, leading to an average unemployment rate of 4.5% over the next three years. The report advocates for public and private investment to address housing and climate change challenges while emphasising the importance of maintaining financial stability.
Robert Kelly, Director of Economics and Statistics, highlights the impact of global changes and reduced domestic capacity on economic growth, indicating a need for strategic adaptation. Meanwhile, the Finance Minister has welcomed the Central Bank’s report, expressing optimism about the forecasted decrease in inflation and its potential benefits for families and businesses, signalling a cautiously optimistic stance amidst economic uncertainties.
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