EY Ireland forecasts Irish economic surge in 2024

The report anticipates a decline in inflation projecting a rate of 3% for 2024 with expectations for further reduction to 2% by 2025

Employment forecast to increase by 1.6% in 2024 and labour market to remain tight (Pictured: Dr Loretta O’Sullivan)

EY Ireland’s Winter 2024 Economic Eye is forecasting a growth uplift for the Irish economy in 2024, with further job gains as inflation tracks lower and interest rate cycle turns.

Economic activity continues to normalise with growth projected to be reasonably solid in the coming years. GDP is forecast to rise by 2.2% in 2024 and 3.8% in 2025 with Modified Domestic Demand growing by 2.2% in 2024 and 2.5% in 2025. Ireland will outperform many economies around the world, exceeding forecasts for our neighbours in the Euro area (0.9% in 2024) and the UK (0.9%) and just above projections for the United States (2.1%).

EY projects further jobs growth ahead, with employment expanding by 1.6% in 2024 and 1.8% in 2025. Inflation continues to moderate after the highs of 2022 and early 2023. EY is forecasting this will stand at 3% in 2024. Encouragingly for businesses, exporters and some mortgage holders, interest rate cuts by the European, US and UK Central Banks appear almost certain at some point in 2024.

In Northern Ireland, EY is forecasting that the economy will expand by 0.7% in 2024 and 1.6% in 2025. Employment is projected to stall in 2024, before returning to a more positive trajectory in 2025, growing by 0.9%. Recent political developments including the restoration of power sharing and the installation of a new Stormont Executive offers the opportunity to unlock further growth potential within the Northern Ireland economy.

Dr Loretta O’Sullivan, chief economist, EY Ireland, said: “The Irish economy has many strengths but to keep pace with global markets we also need to cultivate the seeds of future economic growth by training and upskilling our workforce, investing in necessary infrastructure, accelerating the green transition and harnessing the transformative potential of new technologies such as Artificial Intelligence.

“While there is much to be positive about, a number of global headwinds remain. Geopolitical tensions are high, particularly with the continuing war in Ukraine, the Middle East conflict and the recent attacks on shipping in the Red Sea, which are disrupting global supply chains. With more than half of the world’s population eligible to vote in elections in 2024, it is also a year of significant electoral change which brings a level of uncertainty.”

Graham Reid, head of Tax & Law and Clients & Markets, EY Ireland, said: “The Irish economy continues to demonstrate its resilience and underlying strengths, including access to a skilled and highly productive workforce, world-class universities and a business friendly environment. All of these factors are key in terms of attracting and retaining foreign direct investment as well as enabling and empowering our world-leading indigenous entrepreneurial talent. As we look to the future now is the time to invest in the drivers of tomorrow’s economic growth as we know such investment will pay dividends many times over.”

The two labour markets on the island of Ireland put in a strong performance in 2023. The number of people in employment in Ireland rose to a record high of 2.66 million in Quarter 3, with all regions and most sectors registering gains. Despite layoffs in some high-profile tech companies in recent times, ICT jobs were still up and more than 300,000 were employed by IDA client companies for the second year in a row. Jobs are also forecast to have increased in Northern Ireland by 1.5% in 2023. 

“As developments in the labour market typically lag those in the economy, some cooling is not surprising. But even though jobs growth is forecast to moderate in the Republic of Ireland and stall in Northern Ireland in 2024, unemployment rates are projected to remain low by historical standards. So, recruitment and retention will continue to be an issue for many businesses. For workers, the still tight labour market, along with some compensation for past inflation, as well as the proposed public sector pay agreement, point to further wage increases across the economy” concluded Dr Loretta O’Sullivan.

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