Employment and domestic demand to expand
Strong labour force growth is supported by demographics and inward migration
Commenting, Conall Mac Coille, Chief Economist,
'We saw a poor GDP performance in 2023 where the economy contracted by 1.9%, driven mainly by specific issues in the multinational export sector, however this does not reflect a long term trend. In reality, it is a recession in name only as by most other measures, the economy continued a steady rebound last year. We expect solid activity in the indigenous sector where expansions in employment and domestic demand in 2023 should continue in 2024.'
Key points on new
Irish GDP to expand by 1.5% in 2024, revised down from last projections.
We expect the distortions (from multinationals and 'contract manufacturing') that artificially pushed up on GDP growth in 2022, but down in 2023, have now played out.
Consumer spending to grow by 2.9% in 2024 as pay growth exceeds CPI inflation, which we see slowing to 2.5% and jobs growth of 1.5% sustaining spending. One uncertainty here is the likely timing and pace of further energy price cuts.
Core investment spending to grow by 0.3% weighed down by commercial construction, but helped by homebuilding and 10% rise in public capital expenditure.
Housing completions to grow to 34,000 units in 2024, supporting investment spending, but still well short of the 40-50,000 required to satiate demand.
Unemployment rate to remain close to 4.5% but could potentially rise, as in 2023, if labour force grows more rapidly due to inward migration.
House price inflation likely to remain in low single-digit territory in 2024 due to lack of supply, already evident in MyHome asking price inflation at 4%.
The breakneck pace of jobs growth seen in recent quarters is unlikely to continue. We see employment up 1.6% in 2024, less than half the 3.8% seen in 2023.
Skills and labour shortages to drive up wage growth to 4.2% in 2023.
Bottlenecks, capacity pressures and labour shortages are now the most pressing issue that could hold back growth in the Irish economy. Hence, effectively implementing the National Development Plan and infrastructural investment is key going forward.
Consumer spending
With inflation easing back, consumer sentiment has improved in the past few months, reaching a 23 month high of 74.2 in January. Spending this year should be assisted by higher real incomes - with wage increases likely outpacing CPI inflation - while continued employment growth should also help.
Inflation
Core inflation (ex energy components) is now running higher (5.9%) in December than headline inflation with the changes in energy prices now helping to keep inflation down rather than up. As a small export oriented economy,
Investment
Investment should bounce back this year and
FDI continues to flow in and the IDA announced another 248 investments in 2023 with
Employment
Unemployment remains at low levels though it has picked up of late. The seasonally adjusted rate stood at 4.5% in
Exports
While some of this weakness is down to some restructuring in pharmaceutical and ICT sectors in a post Covid landscape, most of the change in circumstances is restricted to the export of high tech goods, with goods exports down 7.4% in the first three quarters of the 2023 while services exports were up 2.1%.
Housing
House price inflation likely to remain in low single-digit territory in 2024 due to lack of supply, already evident in MyHome asking price inflation at 4%. Housing completions will grow to 34,000 units in 2024, supporting investment spending, but this is still well short of the 40-50,000 required to satiate demand.
Bottlenecks in housing will act as a constraint on growth sooner rather than later unless they are addressed. However, this is easier said than done with a great many competing areas for investment.
GDP
The retraction in ICT appears only to have affected
Modest global growth is not a huge dampener given the Irish export mix and
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