Domestic economy to grow by 2.3% this year
The domestic economy looks set to grow by around 2.3% this year, a new forecast has predicted.
The latest Economic Eye from EY also expects that modified domestic demand, considered the best measure of the performance of the domestic economy, will rise by a further 3.2% next year.
This is despite an expected contraction of 0.3% in gross domestic product (GDP) this year.
However, EY said it thinks there will be a strong GDP rebound next year, with it climbing by 4.5%.
“Right now, the ‘vibes’ the Irish economy are giving are pretty good,” said Dr Loretta O’Sullivan, EY Ireland Chief Economist.
“Consumers are spending, businesses are hiring, exports are rebounding, and tax receipts are buoyant.”
“While GDP is exhibiting some weakness, a host of other metrics indicate that the economy is doing well.”
“Modified Domestic Demand was up in the first half of the year, inflation is back at rates consistent with price stability, the unemployment rate is low, and the tax take is high. There are headwinds of course, some external and some home-grown, but the growth outlook is favourable in the main.”
A big driver of Ireland’s economic health is employment growth and EY’s autumn forecast has revised this up, with the numbers at work now projected to rise 2.2% this year and 1.8% in 2025.
It added that while job vacancies have softened recently, the unemployment rate is set to remain low at 4.4% this year and 4.6% next year.
“Job and wage gains are expected to continue over the forecast horizon, supporting consumer spending, with an anticipated ‘Budget boost’ in the offing for households next week,” said Dr O’Sullivan.
“As the cost of borrowing is an important driver of business spending, more favourable financing conditions as the European Central Bank loosens monetary policy should help lift investment, along with a sustained focus on infrastructure delivery and key digitalisation and decarbonisation agendas.”
“Exports are expanding again too, and prospects for trading partners are broadly favourable.”
However, EY said while the headline fiscal position is strong, it masks underlying vulnerabilities particularly around demographic change, decarbonisation, digitalisation and the risk of de-globalisation.
“Spare capacity in the economy is also relatively limited at present,” said Dr O’Sullivan.
She added that while the main central banks have begun cutting interest rates, back to back reductions are not guaranteed.
Article Source – Domestic economy to grow by 2.3% this year – RTE
