Irish GDP growth expected to match the global economy in 2024 with growth of 2.5%, with an outperformance of 3.2% in 2025. Meanwhile inflation is forecast to continue cooling in most regions, but price pressures could take longer to unwind according to Daragh McGreal, economist with KPMG in Ireland.
The latest economic outlook from KPMG contains largely positive news for Ireland with inflation falling from recent high levels and expected to stabilise in the second half of 2024. KPMG forecasts global GDP growth slipping from 2.7% in 2023 to 2.5% in 2024 with a return to 2.7% growth forecast for 2025.
The predictions in KPMG’s Q2 2024 Global Economic Outlook reflect the current elevated geopolitical uncertainty, with nearly half of the world’s population having already voted or heading to the polls in 2024. Armed conflict and trade tensions are flaring in numerous parts of the world, which could fuel more isolationist policies and Ireland is not immune to potential supply chain challenges and protectionist policies.
Ireland is well placed to at least match the performance of the global economy, however expected interest rate cuts should not be taken as a given. Inflation is proving universally stubborn in some countries and many central bankers have indicated caution on moving too soon on rates.”
Irish growth prospects
The anticipated recovery in the Irish economy is driven by improvements in global trade, easing inflation, and a robust labour market. An alternative measure of the Irish economy, Modified Domestic Demand (MDD) – which better captures domestic economic activity excluding multinational distortions – is anticipated to grow by 2.1% in 2024 and 2.2% in 2025.
Government finances are in relatively stable health, albeit our corporation tax base remains highly concentrated and significant investment is needed to address existing infrastructural bottlenecks.
Geopolitics and competition
Ireland’s economic prospects for 2024 and beyond appear strong, with reasonable levels of growth anticipated across various sectors. This recovery is supported by a favourable external environment and robust domestic economic fundamentals.
However, in this year of elections, potential challenges are continued geopolitical tensions, infrastructure challenges, and competition from peer markets for multinational investment
Inflation
Irish inflation, which has been a significant issue in recent years, is now on a downward trend. In the first quarter of 2024, inflation averaged 2.2%, primarily due to declining energy prices.
The headline inflation rate is projected to continue its decline, falling from 5.2% in 2023 to 2.1% in 2024 and to 2.0% in 2025. Despite this overall fall, underlying price pressures persist due to sustained wage growth, which continues to drive inflation in services.
The labour market
Ireland’s labour market remains strong, with the unemployment rate expected to stay stable at around 4.5% in both 2024 and 2025.
The number of people in employment has never been higher and employment growth is expected to continue, although at a slower pace than previously, supported by growth in the domestic economy. Real wage growth is anticipated to turn positive as inflation eases, boosting consumer spending.
Sentiment
Business sentiment in Ireland has shown signs of improvement, reflecting the broader economic recovery, as businesses become more optimistic about future growth prospects. Some sectors remain cautious due to ongoing geopolitical uncertainties and potential supply chain disruptions.
Consumer sentiment has also improved in the first half of 2024, buoyed by falling inflation and a strong labour market. Retail sales data point to a modest pick-up in consumer demand, which is expected to enable private consumption growth over the forecast period.
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Daragh McGreal
Director, Head of Strategic Economics
KPMG in Ireland
