Ireland Economic Forecast

GDP fell in Q1 quarter on quarter, principally due to a drop in industrial output. However, Ireland’s GDP prints are volatile due to its large multinational sector. Prior data had suggested that the indigenous sector had performed well. Private spending seemed to rise in the quarter: Compared to Q4, the services PMI and consumer confidence averaged higher, while retail sales rebounded. This improvement was probably linked with lower inflation and unemployment in the quarter. Turning to Q2, our panelists expect the economy to rebound 2.1%. Data for April paints a bright picture: Inflation and unemployment fell and consumer confidence and the services PMI rose. In other news, in the last few weeks, both Moody’s and S&P bumped up Ireland’s credit rating. Both Moody’s and S&P expect Ireland to post fiscal surpluses for the foreseeable future, bringing down the national debt.

Harmonized inflation fell to 6.3% in April from 7.0% in March. The lower reading was driven by a dip in transport prices. Inflation should cool in 2023 compared to 2022 due to a harsher base effect, weaker domestic demand, and lower average energy prices. Key factors to monitor include government intervention and natural gas prices.