Ireland projection note OECD Economic Outlook November 2023

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Ireland GDP is set to contract by 0.6% in 2023, as heightened global uncertainties, a weaker outlook in main trading partners and high interest rates weigh on exports and investment. With price pressures subsiding, GDP growth is projected to pick up to 2.4% in 2024 and 2.9% in 2025. Modified domestic demand growth, which removes some distortions due to the high share of multinationals, will decline to 2.1% in 2023, before slowing further to 1.7% in 2024 and returning to 2.1% in 2025. Although tax receipts are set to remain strong, ensuring long-term fiscal sustainability is needed to meet the investment-intensive ageing, housing and climate challenges. The announced move to allocate windfall corporate tax revenues to two new financial vehicles – a long-term savings fund and an investment fund – is thus welcome. Stricter adherence to the 5% spending rule will also be essential. Structural reforms to enhance SMEs’ financing would boost innovation and technology diffusion. Planning regulations should be eased to foster investment in housing and renewable electricity generation. Falling exports have weakened growth momentum Household consumption continued to underpin activity in the first half of 2023, on the back of strong employment growth and lower saving rates. However, increased borrowing costs and still relatively high energy and input prices have weighed heavily on business and housing investment. On the external side, the slowdown in global demand triggered marked reductions in export volumes, adding to the post-pandemic contraction in exports of pharmaceutical and medical products. As a result, GDP contracted in the third quarter of 2023.

Ireland

1. Excludes large transactions of foreign corporations that do not have a big impact on the domestic economy. 2. The participation rate refers to the number of persons in the labour force aged 15 years and over as a percentage of the working-age population. The employment rate refers to the number of persons aged between 15 and 64 in employment as a share of working age population. Source: OECD, National Accounts database; and Central Statistics Office. StatLink 2 https://stat.link/shv2w1

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023


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