The Irish economy continues to perform well but there are potential speed bumps ahead
The Irish economy continues to be one of the best-performing in Europe, with almost full employment and rising incomes boosting consumer spending. Photograph: Tom Honan
More significantly, real wages are forecast to grow as nominal income growth outstrips inflation, providing a much-needed boost to cash-strapped households after two years of squeezed living standards. The increase in real wages will underpin an increase in consumer spending, the main driver of domestic activity.
Hughes is sceptical about the perennial warnings from the Irish Fiscal Advisory Council , the Central Bank of Ireland and others that investing too much poses an overheating risk for the economy. “How this can be managed is far from clear, but it must be done if we are not to move beyond the Irish economy’s current ‘sweet spot’ in terms of demographics and favourable finances fairly quickly,” he says.
“Choices need to be made between different demands. Otherwise, budgetary policy would add to price pressures and make overheating the economy more likely to occur,” Conroy says. The spending rule, adopted in 2022 but broken every year since, seeks to keep the annual increase in Government spending inside a 5 per cent ceiling, seen as sustainable in the long term.
Perhaps the biggest is a further ratcheting up of geopolitical tensions with Russia’s war in Ukraine and Israel’s invasion of Gaza the obvious flashpoints. Either could trigger further disruption to global trade and/or another commodity price shock.
Simon-Harris Cost-Of-Living Jack-Chambers Moody-S Central-Bank-Of-Ireland
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