Irish economy growth 'slowing following rapid rise'
At a glance
A think tank has revised down its growth forecast for the domestic Irish economy this year from 3.5% to 1.8%
Inflation, rising interest rates and falling demand for some exports are all weighing on growth, the Economic and Social Research Institute (ESRI) says
Low unemployment levels are likely to be maintained for the foreseeable future
The move comes as the Irish government is set to announce its budget next week
- Published
Growth in the Irish economy is slowing after a period of rapid expansion following the Covid-19 pandemic, a leading think tank has said.
The Economic and Social Research Institute (ESRI) has revised down its growth forecast for the domestic economy this year from 3.5% to 1.8%.
It said inflation, rising interest rates and falling demand for some exports are weighing on growth.
However, the ESRI added that the economy is still operating at capacity.
It said that low unemployment is likely to be maintained for the foreseeable future.
"Notwithstanding the normalising activity domestically and the slowdown in international trade, the domestic Irish economy is currently operating at capacity," the ESRI said.
"In particular, in relation to employment intensive sectors like construction," it added.
It said the labour market continues to "perform robustly", with unemployment stabilising at approximately 4% over the past year, "indicating the economy is close to, or at, full employment".
Irish domestic output is estimated using a measurement called Modified Domestic Demand (MDD).
MDD, when compared to Gross Domestic Product (GDP), strips out the distorting impacts of multinational companies.
Typically, GDP overstates the growth rate of the Irish economy, but the ESRI said that is not currently the case.
"At the present time, we believe modified domestic demand - a more accurate reflection of domestic activity - is growing at 1.8% in 2023, while GDP is set to decline by 1.6%," it said.
Irish Finance Minister Michael McGrath said there will be four key "priority areas" in the Irish budget
The forecast comes ahead of the Irish government's budget, which is due to be unveiled next week on 10 October.
The budget will include core spending increases of €5.2bn (£4.4bn) and additional temporary spending, such as help with energy costs.
Speaking on Tuesday, Irish Finance Minister Michael McGrath said there would be four key "priority areas" in the budget that will consist of cost of living, housing, competitiveness and long-term financial planning.
The Republic of Ireland is set to run significant budget surpluses in the coming years as it reaps a corporation tax windfall from multinational companies.
Despite strong economic performance, the governing coalition is struggling in the polls as high housing costs and strained public services mean many people feel they are not sharing in the country's prosperity.