DUBLIN: Ireland’s gross domestic product (GDP) is set to contract this year, but its domestic economy is expected to grow, according to the Economic and Social Research Institute (Esri).
Influenced by international factors including rising inflation and high interest rates, GDP will contract by 1.6%, the institute said. It added that this would be the first year the economy fails to expand since 2012.
However, the Esri is also predicting that the domestic economy will continue to grow in 2023 and into 2024. Modified domestic demand (MDD), which the institute describes as a more accurate reflection of domestic activity, will increase by 1.8% in 2023, it said.
Due to the out-sized impact of foreign-owned multinationals, GDP is not generally considered to be a good indicator of the Irish economy.
This highlights the “dual aspect of the Irish economy, the twin track for both the domestic sectors and the multinational sectors”, Esri associate research professor Conor O’Toole said.
Economic growth is usually overstated by the large number of multinationals present in Ireland, however, currently it is understating activity in the domestic economy, according to the Esri.
Last month Ireland’s central bank downgraded growth forecasts in its quarterly economic bulletin. The MDD is now expected to expand by 2.9%, down from a forecast of 3.7% in June. It also had a 2.9% estimate for GDP.
While the Irish economy is operating close to capacity, it “does look set to experience more moderate rates of growth over the short to medium-term”, said professor Kieran McQuinn, who authored the Esri report.
The body expects inflation to continue to negatively impact output and predicted the consumer price index would increase by 6% in 2023 and 3.2% in 2024, given interest rates have not declined as quickly as it previously forecast. — Bloomberg
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