Latest Economic Forecasts
With slow growth in Europe, China and the UK the prospects are that 2023 will record a sharp slow down in growth in the Irish economy before resuming at a reasonable rate in 2024 and onwards.
The attached table shows the latest forecasts made by various organisations. The EU estimates that Irish GDP will record a fall this year of 0.9%. to be followed by growth of 3% in 2024 and 3.4% in 2024. The ESRI is somewhat similar: a decline this year followed by a resumption of growth in 2024-2025. Interestingly enough, the Central Bank is much more optimistic with the Department of Finance somewhat similar.
As is well known GDP is heavily influenced by foreign multinationals which can mean a divergence between GDP and economic activity as perceived by domestic economic agents – individuals and businesses. Modified Domestic Demand (MDD) has been devised by the CSO to yield a measure more aligned with domestic interests. But, on this occasion, notwithstanding the different influences at work, the MDD figures follow the GDP pattern. According to the Central Bank MDD should be up 2.9% this year and by a little bit less in 2024 and 2025. The ESRI sticks to a forecast of a decline this year of 0.9% followed by recovery in 2024.
The main source of the difference between the ESRI and the Central Bank is located in the foreign trade sector where the ESRI foresees a large rise in imports.
It may seem odd that three different forecasting entities in one small city using the same statistics and presumably all drinking in Doheny and Nesbitts should come to different conclusions. On the other hand it means less proneness to groupthink amongst our economists. That said it is strange that one other area of difference is in relation to public expenditure where the Central Bank is significantly higher than the ESRI. The Central Bank is in the public sector: it should know this item.
At least on inflation the two agencies are at idem: both expect inflation to be about the same in 2023, i.e. around 6% depending on what measure is used and to be 3.2% in 2024. The ESRI doesn’t venture into 2025 but the Central Bank forecasts inflation of 2.3% in 2025. The Department of Finance, boldly going where other forecasters do not, forecasts inflation of 2% in 2026.