Michelle ThompsonNews Highlights:
- A research institution has lowered its projection for the Irish national economy’s growth this year, reducing it from 3.5% to 1.8%.
- According to the Economic and Social Research Institute (ESRI), growth is being negatively impacted by inflation, increasing interest rates, and declining demand for certain exports.
- It is expected that low levels of unemployment will continue to be sustained in the foreseeable future.
- This action coincides with the upcoming announcement of the Irish government’s budget next week.
The Irish economy’s growth is slowing down after experiencing a period of rapid expansion following the Covid-19 pandemic, according to a prominent think tank.
The Economic and Social Research Institute (ESRI) has adjusted its growth forecast for the domestic economy this year, reducing it from 3.5% to 1.8%. This adjustment is attributed to factors such as inflation, rising interest rates, and a decrease in demand for certain exports, all of which are exerting downward pressure on growth.
Nevertheless, the ESRI noted that the economy is still operating at its full potential, and it expects low unemployment rates to be maintained in the foreseeable future. The ESRI emphasized that despite the normalization of domestic activities and a slowdown in international trade, the domestic Irish economy remains robust, especially in sectors like construction.
The labor market is also performing strongly, with unemployment remaining stable at around 4% over the past year, indicating that the economy is close to or at full employment.
To assess Irish domestic output accurately, the ESRI employs a measurement known as Modified Domestic Demand (MDD), which eliminates the distorting effects of multinational corporations. In contrast to Gross Domestic Product (GDP), which often overstates the growth rate of the Irish economy, the ESRI currently believes that MDD is growing at a rate of 1.8% in 2023, while GDP is expected to decline by 1.6%.
Irish Finance Minister Michael McGrath has outlined four primary “priority areas” that will be addressed in the Irish budget.
The anticipation builds as the Irish government prepares to unveil its budget on 10 October. This budget will feature primary spending increases of €5.2 billion (£4.4 billion) alongside additional temporary spending measures, particularly to address energy-related costs.
Irish Finance Minister Michael McGrath has highlighted four key “priority areas” in the budget: addressing the cost of living, tackling housing issues, enhancing competitiveness, and ensuring long-term financial planning.
The Republic of Ireland is expected to run significant budget surpluses in the coming years, thanks in part to a substantial windfall from corporate taxes paid by multinational companies.
Despite the country’s strong economic performance, the governing coalition faces challenges in the polls, with high housing costs and strained public services contributing to a sense among many that they are not benefiting from the nation’s prosperity.
