Central Bank of Ireland: Irish Economy Resumes Growth After Retraction
18 June 2024
By Isabel Teles – FRANKFURT (Econostream) – Irish gross domestic product rose by 0.9% on the quarter in Q1 after five successive periods of retraction, and the domestic economy was projected to keep gradually expanding, the Central Bank of Ireland said on Tuesday in its latest quarterly bulletin.
‘The Irish economy is expected to continue to grow at a moderate pace until 2026. Inflation is returning to sustainable levels as global influences on Irish inflation have eased, but domestic price pressures remain high’, Robert Kelly, Director of Economics and Statistics at the Central Bank of Ireland, said.
The CBI projected Irish GDP to be 1.8% in 2024, 4.4% in 2025 and 4% in 2026, with the modified domestic demand (MDD) to grow at an annual average of 2.2% from 2024 to 2026.
Risks to economic growth were tilted to the downside, despite the favourable outlook, and risks to inflation were tilted to the upside, the bulletin said, noting that the main sources of uncertainty were household savings, pharma and ICT manufacturing exports, commodity shocks and fiscal policy.
Domestic price pressures remained elevated in Ireland but were forecasted to ease and to be consistent with inflation returning to sustainable levels, the bulletin said.
‘The process of disinflation has been relatively rapid. Looking forward, the bumpy road is likely to be featured for us here as well in Ireland as it has been noted for the euro area’, Kelly said in a briefing to journalists.
According to the bulletin, even with headline inflation declining, services inflation remained elevated; a moderation or even deceleration in prices of energy, food and non-energy industrial good prices was projected for the next couple of years.
‘As a result, both headline and core measures of HICP inflation in Ireland are likely to ease towards and hover around 2% this year and next’, the bulletin said.
The CBI projected HICP inflation in Ireland to be at 1.7% in 2024, 2% in 2025 and 1.4% in 2026.
The Irish labour market was adjusting with a reduction of the gap between supply and demand, the bulletin said.
‘While we are seeing the labour market being relatively tight, the extent of tightness is certainly coming down and that’s a combination of the supply flat-line and demand easing quite substantially’, Kelly said.
Strong wage growth was expected to result in stronger consumer growth rather than in stronger price increases, he noted.
‘Wage growth isn’t necessarily going to pass-through excessively high price increases because we are also seeing some benefits in terms of productivity growth and profit margins absorbing those higher labour costs’, he said.