EU: Ireland's GDP to drop 1% this year as multinational exports falter

Overall, "export outlook is expected to be negative in 2023, but turn positive in 2024 and 2025, although somewhat less dynamic when compared to previous years", the EU predicts. Pic; Larry Cummins

Ireland's economy will contract by almost 1% this year as the changing fortunes of some of the many multinationals based here weigh on exports and output, the European Commission has predicted.

In its autumn forecasts, the commission also forecasts that the rate of inflation here will cool considerably to 2.7% in 2024, but that employment growth will keep unemployment close to its current record low rate over the coming years.

The commission's report on Ireland is part of its EU-wide forecasts and keeps the focus on the "shifting" pattern of export demand for some of the Irish-based multinationals since the ending of the pandemic. Pharma and contract manufacturing multinationals, in particular, have been hit by reduced demand for their goods exports, while "by contrast" the tech giants, which sell services such as software to world markets, are maintaining "robust growth", the EU said in its Ireland scorecard.

Overall, "export outlook is expected to be negative in 2023, but turn positive in 2024 and 2025, although somewhat less dynamic when compared to previous years", the EU predicts.

The mixed fortunes of the multinationals will mean Irish GDP will fall by 0.9% this year and grow by 3% in 2024, a much slower rate of expansion than in recent years. Those forecasts compare with the respective growth rates of 0.6% and 1.2% rates it projects for the eurozone-wide economy over the same two years.

An alternative measure of Irish economic output, modified domestic demand, which can give a more accurate picture of the domestic economy, has continued to grow this year although "at a more moderate pace", as inflation weighs on households and businesses, the EU said in its commentary.

Irish inflation will remain elevated at 5.3% this year, and then fall to 2.7% in 2024, and to just over 2% in 2025, according to the EU forecasts.

However, it also predicts that Ireland's long record of employment growth is set to continue. That means that Irish unemployment will remain mostly unchanged at its current rate of 4.2% over the next two years, "reflecting the continued expected growth in the domestic economy".