Ireland’s economy has been shrinking over 2023 and will experience flatter growth for the next years, that’s according to new data from the EU.
The European Commission has publish its Autumn Economic Forecast this morning. It warns that the European economy “has lost momentum but a rebound is still expected”.
European Economy Commissioner, Paolo Gentiloni, said the outlook was “challenging”.
After performing better than much of Europe in recent years, Ireland now looks set to fall behind the curve.
“Following strong growth in 2022, GDP is expected to decline by 0.9% in 2023 amid developments
in multinational-dominated sectors and normalising domestic demand. It is thereafter forecast to
pick up to 3.0% in 2024 and 3.4% in 2025. Following its peak of 8.1% in 2022, consumer price
inflation is set to moderate throughout 2024 and reach 2.1% in 2025. The government budget
surplus is projected to shrink in 2023 and 2024, before rebounding at around 1% of GDP in 2025.”
The particular international structure of Ireland’s modern economy makes it especially vulnerable to current economic headwinds, the European Commission warns.
Looking globally, China’s economy is slowing down and that is having a knock-on effect for Ireland, according to EU data.
“Germany and Ireland [are] exhibiting the largest trade exposure to China, reaching 6.8% and 6.4% of total exports in 2022. Measuring trade exposure as a share of economic output, exports destined directly to China make up only 1.5% of EU GDP, with Germany and Ireland again displaying the highest shares
(2.8% and 2.6%, respectively).”
During 2023, whilst real GDP increased in France, Spain, Belgium and Latvia, growth stagnated in Germany and Italy. “The decline in Ireland was even more pronounced, at 1.8%”.
Other significant findings for Ireland highlighted by the European Commission:
- “Investment dynamics were very volatile across Member States in the first half of the year, with sharp declines in Ireland”
- “Deficits remain high in many Member States. In 2023, 12 EU Member States are set to have a deficit greater than 3% of GDP. This number is expected to increase to 13 in 2025 based on the customary no-policy-change assumption, when all Member States but Cyprus and Ireland are projected to still have a headline budgetary position worse than in 2019, i.e. before the COVID-19 pandemic.”
- Employment: “In the first half of the year, the highest increases in headcount employment were recorded in Estonia, Ireland and Spain compared to 2022-Q4 levels.”
- House prices: “Since 2010, prices have doubled in Germany and the Netherlands, while Portugal, Ireland, Czechia, Austria, Luxembourg, Latvia, and Lithuania have seen even stronger price growth.