The Economic and Social Research Institute’s (ESRI) most recent quarterly report conveys a relatively optimistic outlook for the economy in 2024. The text suggests this year will see positive trends across all significant economic indicators, following the fluctuations experienced during the Covid-19 pandemic. It anticipates growth in exports, an increase in investment, and consumer spending progression. At 2.3 per cent, the domestic economic growth forecast is modest, but it is a satisfactory projection as households recover from a cost-of-living crisis.
The government may draw some comfort from these encouraging figures. The expectation is for low unemployment rates to persist and for the public financial situation to show a robust surplus. The number of people in employment is set to continue its upwards trajectory, though at a slower pace, and falling interest rates and inflation rates should act in households’ favour.
These conditions suggest that the primary driving forces of the Irish economy will maintain momentum over the upcoming year. This is despite the impact of decreased exports, substantially caused by a downturn in pharma sales from pandemic-induced highs, as well as a dip in investment that marked the economic data from the previous year. Increased interest rates also imposed a strain on households and investment in 2023.
History urges caution when it comes to anticipations of stability, yet 2024 is still favoured to be a more conventional year economically. That said, the pace of Irish economic growth – assessed by the ESRI to have an average of 5 per cent per year from 2013 to 2022 when distortions are taken into account – is in the process of decelerating.
The report also underscores the notorious issue of driving up investment. The subsequent strong growth and population surge over the previous decade have led to critical shortages in vital sectors such as housing, water, energy, education, healthcare, among others, while also grappling with the challenge of achieving climate objectives. According to new data in the report, Ireland’s investment rate still trails behind other European countries.
However, raising the investment expenditure is not a simple task considering the economy is functioning near its maximum capacity, leading to considerable challenges for policymakers in addressing these shortages. If they overspend, do they stand to receive poor return and trigger inflation? Labour deficits in sectors like construction obstruct progression, and the ESRI highlights the need for long-term planning to mitigate this issue while also maintaining a steady influx of skilled workers for Ireland’s multinational sector.
The issues at hand are multifaceted and vital to consider during policy formulation. In recent past, Ireland’s economic framework has prioritised growth, disregarding potential consequences. We are at a juncture where a re-evaluation of the current direction of the state becomes imperative to ensure sustainable progression. Prioritising, enhancing and investing in crucial socio-economic assets, as well as those that aid Ireland in achieving decarbonisation should be the way forward.