Following double digit growth in 2022, GDP is projected to remain on a solid growth path of 5.5% in 2023 and 5.0% in 2024. Net exports are the main driver of economic activity, which is also supported by resilient private consumption. Inflation is estimated to have peaked at 8.1% in 2022 and is set to moderate gradually throughout 2023 to reach 2.6% in 2024. The budget surplus is projected to increase further in 2023 and 2024.
| Indicators | 2022 | 2023 | 2024 |
|---|---|---|---|
| GDP growth (%, yoy) | 12,0 | 5,5 | 5,0 |
| Inflation (%, yoy) | 8,1 | 4,6 | 2,6 |
| Unemployment (%) | 4,5 | 4,3 | 4,3 |
| General government balance (% of GDP) | 1,6 | 1,7 | 2,2 |
| Gross public debt (% of GDP) | 44,7 | 40,4 | 38,3 |
| Current account balance (% of GDP) | 8,8 | 11,1 | 11,9 |
Economic activity continues to show dynamism
Ireland’s real GDP is estimated to have increased by 12.0% in 2022, driven by a rebound in private consumption and the continued solid performance of net exports, related to the activity of multinational companies. Sentiment readings in the first quarter of 2023 reflected an upbeat pace of activity. Real GDP is expected to grow by 5.5% in 2023 and 5.0% in 2024. Modified domestic demand, which better reflects underlying domestic economic activity in Ireland, is estimated to have increased by 8.2% in 2022, and is expected to expand by 2.0% in 2023 and 2.3% in 2024.
Private consumption, a stable driver of domestic growth, is expected to remain solid thanks to increasing household income and employment. While retail sales and services grew only mildly in early 2023, consumer sentiment in Ireland appears resilient to cost‑of‑living pressures. The high savings rate is expected to decrease gradually but remain far above the historical average.
In 2022, investment grew by 25.9%, partly driven by a few large machinery investments by multinationals. However, these investments are estimated to have begun to ease in the second half of 2022. In 2023, high borrowing costs are set to impact households’ and firms’ investment, particularly in construction. Capacity constraints in the construction sector are likely to slow housing completions. In 2024, investment is projected to regain some momentum as capacity constraints ease and the implementation of the National Development Plan continues.
Exports are set to remain the main driver of Ireland’s economic performance. Industrial production volumes and information and communication services’ turnover remain strong. Also, decreasing energy prices and easing supply chain problems are projected to favour export growth. However, the recent record performances of the export-intensive pharmaceutical and information and communication sectors, which followed the uplift during the pandemic, are unlikely to be sustained. While remaining strong, net exports are projected to moderate slightly in 2024.
The labour market is operating at full employment
Despite a recent rise in the participation rate – now 2 pps above the pre‑pandemic level – the vacancy rate is above historical averages, indicating marked difficulties to fill vacant positions. At the beginning of 2023, the number of people in work was close to record levels and the unemployment rate was at near-historic lows of 4.3%. This labour market tightness is expected to persist throughout the forecast horizon. As the Irish economy is estimated to be operating at full employment, real wages are projected to increase significantly.
Inflation projected to ease
HICP inflation reached 8.1% in 2022, driven by an increase of more than 40% in the energy component, around 7% in food and more than 4% in the remaining categories. Inflation is projected to decrease to 4.6% in 2023 and 2.6% in 2024 as energy prices decrease. However, core inflation is expected to settle more slowly as food prices increase throughout the forecast horizon and wage pressures feed into services prices. Core inflation is projected to reach 5.3% in 2023 and 4.6% in 2024.
Risks to the outlook include a potential shock affecting global and high‑value added sectors and the impact of housing undersupply on labour supply growth and competitiveness.
Budget balance to remain in surplus
Ireland’s general government budget balance registered a surplus of 1.6% of GDP in 2022. In 2023 and 2024, government budget surpluses are forecast to widen to 1.7% and 2.2% of GDP, respectively. Revenue growth in 2023 and 2024 is projected to be supported by a robust labour market and strong dynamics in the economy. Expenditure is driven mainly by trend growth in core spending. The net budgetary cost of the energy support measures is projected in the Commission 2023 spring forecast at 0.3% of GDP in 2023, compared with 0.5% in 2022. The Commission currently assumes a full phasing out of energy support measures in 2024. The 2023 draft Stability Programme also allocates EUR 2 billion to a contingency for hosting persons fleeing Ukraine. In the longer term, international tax policy changes are set to take effect, and might reduce revenues from corporate taxes.
The general government debt-to-GDP ratio is forecast to decrease from 44.7% in 2022 to 40.4% in 2023, and 38.3% in 2024.