Dáil Éireann Debate, Thursday - 1 February 2024
131. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which positive conclusions can be drawn from this country’s economic performance when considered alongside other EU zone countries and all other European countries; if the methodology for the measurement of the economy here continues to be robust and accurate; and if he will make a statement on the matter. [4546/24]
View answerEconomic growth across the Eurozone, the European Union and more broadly remains subdued, and Ireland is facing many of the same headwinds as our European peers. The European economy recorded weak growth in 2023, with GDP in both the euro area and the EU growing by ½ a per cent compared to 2022. Of note, the single market’s largest economy, Germany, registered a contraction of -0.3 per cent in 2023.
The CSO have estimated Irish GDP to have declined by 1.9 per cent in 2023. However, as is well documented, Irish GDP is notoriously volatile, subject to revision, and is not useful in measuring the living standards of Irish residents. This is because it includes the globalised activities of large multinational enterprises such as, inter alia, contract manufacturing - essentially manufacturing out-sourced to third party manufacturers in third counties. Indeed, contract manufacturing has been a key driver of the decrease in GDP in recent quarters, alongside a fall in demand for pharmaceutical exports in the wake of the pandemic.
In contrast to the negative GDP estimate, modified domestic demand (MDD) – a more appropriate measure of the Irish domestic economy – recorded positive growth in the first three quarters of 2023. Although data for the fourth quarter is not yet available, MDD increased by 0.8 per cent in the first three quarters of 2023 compared to the same period in 2022. This speaks to the resilience of the domestic economy, despite the headwinds of persistent inflation and the related tightening of monetary policy throughout last year. Growth in the domestic economy has been underpinned by the continued strength of the labour market, with the level of employment reaching record levels in the third quarter of 2023. Cost of living supports targeted toward the most adversely impacted households have also acted as a tailwind to the domestic economy.
Looking ahead, growth in the Irish and euro area economies is expected to remain subdued this year. In the most recent OECD forecasts in November, MDD is projected to grow by 1.7 per cent in 2024, while euro area GDP is projected to increase by 0.9 per cent. Uncertainty surrounding the international outlook remains, however, amid heightened geopolitical tensions, uncertainty surrounding the full impact of monetary policy tightening, and the risk of persistent core inflation. My Department will continue to monitor threats to the Irish economy and will publish updated forecasts in the spring.
