The Irish economy will contract by 0.5 percent this year before ping ponging back to growth next year, according to the European Commission.
“Ireland’s GDP is expected to decline by 0.5 percent in 2024, mainly due to a contraction in the multinational sector in the first half of the year. Economic activity is projected to rebound with growth of 4.0 percent in 2025 and 3.6 cent in 2026.”
The return to growth is “supported by a strong labour market, low headline inflation and favourable external environment. Headline inflation is set to remain low over the forecast horizon.”
“Irish exports rebounded in the first half of 2024, led by a retun to growth in pharmaceutical trade and continued strength in service exports, even when excluding intellectual property-related activities. Looking ahead, exports are expected to contribute positively to economic growth, supported by a favourable external environment and continued growth in key sectors such as pharmaceuticals and computer services.”
The EU’s Autumn Forecast published this morning also predicts that public finances will “normalise” in the coming years “after further positive surprises in revenues and strong increases in expenditure.”
That could be a warning to the next government not to count on the extraordinary levels of income Ireland has been receiving from its international tech sector.
The European Commission also sounds a note of caution about the way that money is being spent. If the cash, including billions from Apple, had been used for paying off Ireland’s national debt, the state’s debt ratio would have fallen faster.
“The general govemment debt-to-GDP ratio is forecast to decrease from 41.6% in 2024 το 38.3% in 2025, and to 36.8% in 2026. The debt ratio is set to fall more slowly than if the budget surpluses were translated mechanically into debt reduction, also due to transfers to the newly- established Future Ireland Fund and Infrastructure, Climate and Nature Fund, and accrual adjustments.”
The picture across the European Union is more muted.
“After a prolonged period of stagnation, the EU economy is returning to modest growth”, the European Commission says.
“After resuming growth in the first quarter of 2024, the EU economy continued to expand throughout
the second and third quarters at a steady, albeit subdued, pace.”