The Irish economy returned to growth in the first quarter of 2024 as activity in the State’s multinational-dominated technology sector increased.
According to preliminary data from the Central Statistics Office (CSO), gross domestic product (GDP) rose by 1.1 per cent in January, February and March when compared with the previous three months.
GDP had contracted for the five previous quarters largely because of a fall-off in exports. This had placed the Irish economy in a technical recession, defined as back-to-back quarters of negative growth.
While GDP contracted last year, modified domestic demand (MDD), a more accurate measure of domestic activity, had remained positive.
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Minister for Finance Michael McGrath has cautioned that GDP is not a useful measure of living standards in the domestic economy given the outsized role of the multinational sector.
“In today’s release, GDP is estimated to have expanded by 1.1 per cent in Q1 2024 in volume terms when compared with Q4 2023,” the CSO’s Enda Behan said.
“This was driven by an increase in the multinational-dominated sector of Information and Communication in Q1 2024,” he said, while noting GDP is estimated to have fallen by 0.8 per cent when compared with the same quarter of 2023.
The Government’s recent stability programme update, an annual filing to the European Commission, projected the Irish economy would grow in GDP terms by 2.6 per cent this year and by 3.9 per cent in 2025 on the back of a rebound in multinational exports.
MDD is forecast to grow by a modest 1.9 per cent this year, down from a previous projection of 2.2 per cent, and by 2.4 per cent in 2025. “Some areas of the economy, especially the labour market, remain resilient, and more positively, inflation appears to be subsiding faster than anticipated,” it said.
The report warned that the possibility of an escalation in geopolitical tensions or further energy price shocks represented the chief downside risks to the forecasts.
Conversely it said growth could be stronger if the multinational grows at a stronger-than-expected pace or if inflation reduces more rapidly.
The European Commission recently cut its forecast for growth in the euro zone this year from 1.6 per cent to 0.8 per cent. The slower growth projection came on the back on still high borrowing costs and decreasing state supports to help to cover energy costs.
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