Ireland’s economy expected to experience growth over the next two years
Economy

ESRI Predicts Solid Growth for Ireland’s Domestic Economy in Next Two Years, but Addressing Infrastructure Bottlenecks is Critical to Sustainable Development

The Economic and Social Research Institute (ESRI) predicts that Ireland’s domestic economy will see solid growth in the next two years, with modified domestic demand (MDD) expected to increase by 2.3% this year and 2.5% next year. MDD, a measurement that eliminates the impact of multinational companies on Ireland’s economy, provides a more accurate representation of domestic economic activity.

However, inflation and higher interest rates affected spending and investment in 2022, leading to a slow growth rate of just 0.5% for MDD. The economy recovered strongly from the pandemic but slowed significantly in 2023, with higher inflation putting a strain on households and limiting real pay growth. Real pay, adjusted for inflation, is an important measure of changes in living standards and essential for economic growth and stability.

Gross Domestic Product (GDP) is the typical measure of economic performance but is heavily distorted by multinational activities in Ireland. In 2023, Irish GDP actually shrank by 3.2%, reflecting the impact of US pharmaceutical firms coming off their pandemic highs. The ESRI anticipates a rebound in Irish GDP over the next two years as global trade improves.

The think tank highlighted the importance of addressing infrastructure bottlenecks as a critical challenge for Ireland’s economy moving forward. This includes issues related to housebuilding, renewable energy, and public transport. For example, plans for an underground rail link between Dublin Airport and the city center have been in the works for over 20 years, underscoring the need for timely and efficient infrastructure development to support economic growth and prosperity in Ireland.

In conclusion, while MDD provides a more accurate representation of domestic economic activity than traditional measures such as GDP due to multinational companies’ impact on Ireland’s economy, it has shown slow growth rates due to inflationary pressures affecting spending and investment decisions made by businesses.

Furthermore, addressing infrastructure bottlenecks is crucial to ensure sustainable economic growth moving forward as it affects various sectors such as housing construction, renewable energy production and public transportation systems which are vital components of any modern economy.

Overall, if we want to achieve long-term success in terms of economic development in Ireland

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