Ireland avoids recession in 2023 but EU slashes GDP outlook 

The EU projects that Irish GDP will grow only 1.2% this year, reflecting the lingering effects from the 'sustained weakness' for pharma exports in 2023

Ireland’s growth outlook has significantly deteriorated this year as a hangover from weak pharma exports in 2023 continues to weigh on the economy, even as the prospects for employment remain much brighter, according to the EU Commission.

In its new winter update, the Commission has rowed in with other forecasters who see only muted growth in the economy this year, at least when measured in terms of GDP, but who nonetheless project healthy economic growth when measured by alternative measures that reflect household spending.

The Commission now projects that GDP will grow only 1.2% this year, representing a mild recovery from the contraction of 1.9% in 2023, after allowing for the knock-on effects from the “sustained weakness” for pharma exports, and from other factors to do with the way Irish-based multinationals account for their international manufacturing activities across the globe.

According to the EU, there is better news for the domestic economy. The economy, which avoided recession in 2023 when measured by modified domestic demand, will continue to grow this year, helped by “a resilient labour market, decelerating inflation and rising real incomes” into 2025.

As long as the risks from war and inflation do not worsen, the outlook for Irish exports will also in time brighten. That will reflect “an improvement in external trade conditions coupled with recent large-scale investments” by large unnamed companies, the Commission said in its winter outlook.

On Irish inflation, the report has some mixed news. Inflation is moderating from the annual average rate of 5.2% last year, but is seen running at just below 2% under the EU inflation measure in 2025, as wage pressures build in an expanding domestic economy under potentially full employment, despite falls in energy prices, the new forecasts suggest. The Central Statistics Office said that the measure of Irish consumer inflation was running at 4.1% in January. On housing, the Commission points to figures for housing completions and commencements which “suggest that dwelling investment remains strong over the forecast horizon”.

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Across the EU, the Commission said the “broad stagnation of the EU economy throughout 2023 carried over into weak momentum entering the new year”. It sums up the state of the European economy in early 2024 as reflecting a “delayed rebound in growth amid [a] faster easing of inflation”. It projects the eurozone economy will grow 0.8% this year and by 1.5% in 2025, while inflation across the zone will average 2.7% and 2.2%, in the respective years.

“All in all, the conditions for a gradual acceleration of economic activity this year appear to be still in place,” the Commission said.

Meanwhile, annual export figures from the CSO provided more details about the scale of the hit for Irish-based multinationals last year. By value, total goods exports fell to €197bn in 2023, down 6% from 2022, reflecting a sharp fall in chemicals and medical and pharma goods. Exports to Britain and the EU rose slightly, but goods exports to the US fell, the figures show.