Ireland’s Economic Outlook

Ireland has enjoyed several years of back-to-back economic growth, but with recent global geopolitical events putting strain on the global economy, and a cost-of-living crisis eroding disposable incomes, how will Ireland fair as the world faces a potential downturn? Dr. Daragh Mc Greal, Strategic Economics Director examines Ireland’s economic outlook.

2022 began with a degree of cautious optimism as Covid-19 restrictions were gradually eased in Ireland and globally. However, what has followed has been a series of challenges that have tested the resilience of even the most robust companies and economies.

The rapid return to activity following two years of pandemic shutdowns and restrictions created supply chain challenges and shortages, while the conflict in Ukraine has resulted in a deep energy crisis. As a result, businesses across a multitude of sectors are grappling with shortages in everything from oil and gas to wheat and microchips. 

While Ireland’s economy is highly globalised – providing access to international markets and global talent – this also carries with it risks during times of global uncertainty. These global-domestic interdependencies have been key drivers of Ireland’s economic fortune over the past two decades.

On the upside, the country’s skilled and open labour market, talent pipeline and easy access to both the European and UK markets are all likely to contribute to growth over the coming years, particularly in resilient sectors such as Life Sciences and ICT. Foreign direct investment (FDI) appetite in Ireland remains strong and further investment is expected in the medium-term.

On the downside, there are a number of clear and present headwinds. Ireland’s close trading relationships with the EU, UK and US, all of which face the risk of recession, create the risk of a downturn in Ireland if downturns in these economies create negative spill-over effects. Ireland has mitigated this risk through the diversification of its export-focused economy, but this is unlikely to be enough to fully insulate the country from such shocks.

On the whole, Ireland’s economy is in a reasonably strong position in the face of multiple headwinds and downside risks. At the same time, the breadth of uncertainty as to European and global growth is significant, and actual outturns will not be fully felt until 2023.