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The boom is back as economy to grow strongly for years, says Central Bank

  • Significant consumer spending predicted post-Covid
  • Budget forecast to go into surplus in 2023, two years earlier than had been predicted

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Shoppers on Henry Street in Dublin as all non-essential retail reopened last year. Photo: PA

Shoppers on Henry Street in Dublin as all non-essential retail reopened last year. Photo: PA

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Shoppers on Henry Street in Dublin as all non-essential retail reopened last year. Photo: PA

Ireland’s economy will boom for the next three years as we emerge from the pandemic, the Central Bank has predicted.

Consumer spending will play a big part in strong growth, which is expected to average 6.5pc a year until 2024.

This spending will oil the wheels of domestic firms which, combined with exports, will add an estimated 167,000 jobs over the next three years.

The Central Bank’s first quarterly economic bulletin of 2022 offers a rosy picture, and means the budget is forecast to go into surplus in 2023, two years earlier than had been predicted.

There is good news for workers, as wage rises are set to outpace price increases over the next three years.

However, higher electricity and home heating bills are here to stay, with energy prices unlikely to fall back from their current levels – although they will stop spiking next year, the Central Bank predicts.

“It certainly is a very positive outlook,” said Mark Cassidy, the Central Bank’s director of economics and statistics.

“We really have an economy that has strong momentum and is expected to get back to potential, back to a full employment position by 2024, which is much earlier than we would have expected.”

The economy is set to recoup its pandemic losses this year, with gross domestic product to rise by 8.7pc, following a massive 16.1pc boost in 2021. Ireland was the only EU country to see positive GDP growth in 2020.

GDP is predicted to grow by 5pc in 2023 and by 6pc in 2024, well above previous forecasts.

Modified domestic demand – which strips out volatile multinational transactions such as patents and aircraft leasing – is set to grow 7.1pc this year, then 5.2pc in 2023 and 4.8pc in 2024, contributing more to growth than exports.

Inflation will average 4.5pc this year but will fall back to 2.4pc in 2023 and 2.1pc in 2024, the Central Bank said.

That compares to predicted wage rises of 3.3pc this year, 4.5pc in 2023 and 5pc in 2024.

Employment is set to grow by an average of 6.9pc to 2024, driven by record numbers of women in the workplace — probably as a result of wage rises and more flexible working conditions during the pandemic, the Central Bank said.

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It means the jobless rate should fall to 5.8pc this year, 5.3pc in 2023 and 4.6pc by the end of 2024, which the Central Bank defines as “full employment”.

Despite all the good news, the Central Bank admitted the economy could overshoot expectations, leading to unfilled jobs and higher-than-forecast wage rises, which could, in turn, push up prices.

“The balance of the risks has maybe turned more toward a risk of overheating,” Mr Cassidy said.

“We’re getting close to a position of full employment. Labour shortages are already beginning to emerge, particularly in some sectors. The vacancy rate across the economy as a whole is at the highest rate on record, albeit that records only go back to 2008.

“Therefore, what we’re looking at is increasing wage pressures in the economy, and the risk, I suppose, of some form of upward dynamic between wages and prices. It’s an upside risk, in a way, in that it reflects the strength of growth in the economy.”

Home building could also be affected if the cost of supplies and labour continues to rise, which the bank said could “limit the extent to which increased expenditure translates into more housing units”.

It said the Government must “carefully manage” investment in housing, climate change and infrastructure so as not to add to inflation.

The upbeat predictions come a day after the International Monetary Fund trimmed its growth forecast for the world economy due to potential new Covid strains, supply chain disruptions, inflation and geopolitical tensions.


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