KPMG Economic Outlook for the global and Irish economy shows reasons to believe that Ireland’s technical downturn has passed and growth of up to 3% can be achieved in 2024.
- Globally, deceleration in growth in some of the world’s largest economies could see global GDP growth easing slightly to 2% in 2024
- Despite this, there are reasons to believe that Ireland’s technical downturn has passed and that growth of up to 3% can be achieved in 2024
- Underlying strengths in key export sectors and a consistent stable base level of consumption demand have driven growth in recent years, but Ireland experienced a fall-off in economic activity in H2 2023
KPMG Economic Outlook for the global and Irish economy shows reasons to believe that Ireland’s technical downturn has passed and growth of up to 3% can be achieved in 2024.
Following on from a strong post Covid bounce-back, Ireland’s economic growth evolved in 2023, with the domestic economy becoming the predominant driver of growth. While the slowdown in global demand triggered marked reductions in export volumes, the level of demand in the domestic economy contributed to the creation of over 100,000 jobs. In a note of caution, the report also says that in 2024, global trade complexities could hamper Ireland’s growth potential and export-facing businesses need to prepare for these challenges.
Daragh McGreal, Economist at KPMG, said “At a time of significant global economic and geo-political uncertainty, Ireland’s economy appears relatively resilient. The outlook is for more modest growth in 2024, mirroring more typical growth rates seen in other mature economies, however there are risks to consumption from ‘higher for longer’ interest rate impacts.”
Global risks and local impacts
With the multinational sector accounting for more than 50% of Irish GDP since 2020, global shifts can have large local impacts. In 2023, Modified Domestic Demand (MDD, a measure of the domestic economy) continued to grow, albeit at a more moderate pace in the context of high inflation that is curbing spending by households and businesses.
Cost of living challenges abating, but slowly
Inflation remained elevated throughout 2023 but gradually fell over the course of the year. Although energy prices fell earlier in 2023, these are only filtering through to the consumer more recently.
According to KPMG’s Daragh McGreal “The central outlook is for a gradual easing in energy prices and a restoration of real incomes to pre-2022 levels, retail energy prices are likely to stay elevated and will remain vulnerable to further volatility in the energy market.”
Despite ongoing government support, arrears in retail energy markets indicate that a cohort of consumers are facing difficulties with meeting higher costs. In addition, inflation is now being driven by higher housing and food costs, which are in turn dragging on domestic consumption. Overall, it appears that that ECB’s tighter monetary policy since 2022 is impacting inflation but slowly.
Cautious optimism on growth
Over the coming years, Ireland is expected to see more moderate growth rates, as consumption recovers with rising real wages, subsiding price pressures, and a strengthening in investment and exports as external demand picks up.
KPMG Economist Daragh McGreal said “Taken together, there are reasons to be optimistic about Ireland’s economic outlook in 2024 and beyond. However, while positive growth is expected, this will be more modest than in the past. In addition, the volatility we witnessed in corporation tax receipts in 2023 is an indication that more cautious budgetary policy may be required. Meanwhile significant levels of investment are needed over the coming years in infrastructure, housing, healthcare, and renewables, to meet the demands of a growing population and economy.
Mixed trends in the real estate market
Multi-year growth in Ireland’s residential property market slowed in 2023, but the market remains broadly static, with competing forces of a continued lack of supply and increasingly stretched affordability leading to the levelling off in growth.
After a marked increase in housing completions in 2022, and weathering of supply pressures in 2023, there is an indication of further growth in 2024. Meanwhile, Ireland’s commercial property market went through a downturn in 2023, with a recovery expected by 2025.
Global and trade partner growth
Globally, geopolitical tensions and political uncertainty could result in relatively weak business investment in the early part of 2024. But unemployment is expected to stay relatively low – at just below 6% on average globally – providing some support for consumer spending.
Overall, KPMG expects global growth to slow slightly to 2.2% in 2024, before rising to 2.6% in 2025. These growth rates are respectively higher than for the UK (0.5% and 1.0%) and for the Eurozone (0.6% and 0.9%), highlighting that most growth in 2024 will be generated away from the economies of Ireland’s core trading partners.
Daragh McGreal, Economist at KPMG, said "While open economies typically face greater challenges during global downturns, they are also best placed to take advantage of underlying global growth potential during recoveries."
Get in touch
For further information on the issues raised in the KPMG Economic Outlook, please contact Daragh McGreal of our Strategy team. We'd be delighted to hear from you.
Daragh McGreal
Director – Head of Strategic Economics
KPMG in Ireland
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