Inflation to continue to fall and consumer spending will expand

Bank of Ireland publishes latest Economic Outlook for Ireland 2024/2025

  • Employment and domestic demand to expand
  • Strong labour force growth is supported by demographics and inward migration
  • Ireland must keep a close eye on competitiveness

Bank of Ireland is forecasting Irish GDP growth of 1.5% in 2024 and 4% in 2025 in its latest Economic Outlook for Ireland.

Commenting, Conall Mac Coille, Chief Economist, Bank of Ireland said: “The impact of the fall in GDP last year will reverberate though 2024 and hold back growth to 1.5%. However, with inflation falling back and real incomes growing, consumer spending should continue to expand while continued house building should underpin domestic investment growth, with both contributing to a solid rise of 2.3% in modified demand.

“We saw a poor GDP performance in 2023 where the economy contracted by 1.9%, driven mainly by specific issues in the multinational export sector, however this does not reflect a long term trend. In reality, it is a recession in name only as by most other measures, the economy continued a steady rebound last year. We expect solid activity in the indigenous sector where expansions in employment and domestic demand in 2023 should continue in 2024.”

Key points on new Bank of Ireland forecast

  • Irish GDP to expand by 1.5% in 2024, revised down from last projections.
  • We expect the distortions (from multinationals and ‘contract manufacturing’) that artificially pushed up on GDP growth in 2022, but down in 2023, have now played out.
  • Consumer spending to grow by 2.9% in 2024 as pay growth exceeds CPI inflation, which we see slowing to 2.5% and jobs growth of 1.5% sustaining spending. One uncertainty here is the likely timing and pace of further energy price cuts.
  • Core investment spending to grow by 0.3% weighed down by commercial construction, but helped by homebuilding and 10% rise in public capital expenditure.
  • Housing completions to grow to 34,000 units in 2024, supporting investment spending, but still well short of the 40-50,000 required to satiate demand.
  • Unemployment rate to remain close to 4.5% but could potentially rise, as in 2023, if labour force grows more rapidly due to inward migration.
  • House price inflation likely to remain in low single-digit territory in 2024 due to lack of supply, already evident in MyHome asking price inflation at 4%.
  • The breakneck pace of jobs growth seen in recent quarters is unlikely to continue. We see employment up 1.6% in 2024, less than half the 3.8% seen in 2023.
  • Skills and labour shortages to drive up wage growth to 4.2% in 2023.
  • Bottlenecks, capacity pressures and labour shortages are now the most pressing issue that could hold back growth in the Irish economy. Hence, effectively implementing the National Development Plan and infrastructural investment is key going forward.

New Bank of Ireland Irish Macroeconomic Forecasts

Consumer spending

With inflation easing back, consumer sentiment has improved in the past few months, reaching a 23 month high of 74.2 in January. Spending this year should be assisted by higher real incomes – with wage increases likely outpacing CPI inflation – while continued employment growth should also help. Bank of Ireland is predicting Consumer Spending growth of 2.9% for 2024 and 3.0% for 2025.


Bank of Ireland is forecasting that inflation will fall further, helped by domestic energy providers cutting prices and combined with the ongoing impact from an aggressive interest rate hiking cycle. CPI is forecast to average 2.5% this year, down from 6.3% last year, and to 2.0% next year.

Core inflation (ex energy components) is now running higher (5.9%) in December than headline inflation with the changes in energy prices now helping to keep inflation down rather than up. As a small export oriented economy, Ireland has to keep a close eye on the competitiveness impact of sustained price level impacts particularly if inflation falls back faster elsewhere than compared to Ireland.


Investment should bounce back this year and Bank of Ireland is forecasting small gains in both headline investment and modified investment in 2024, strengthening to 2% and 3.5% increases respectively in 2025.

FDI continues to flow in and the IDA announced another 248 investments in 2023 with Ireland continuing to attract high value and high tech services and manufacturing names. Continues to improve – housing supply has picked up further in the face of continued very strong demand with 32,695 completions in 2023, an increase of 10% from 2022. This number should improve again this year which bodes well for an economy desperate for more housing. There is also a host of public funding infrastructure projects to support building activity with the only real weak spot being commercial building which probably slowed again in 2023 as the sector adjusts to the post-Covid landscape.


Bank of Ireland is forecasting that employment growth will slow from 3.6% last year to around 1.5% in each of the next two years. The rapid pace of job creation has been facilitated by strong labour force growth, supported by demographic factors and robust inward migration.

Unemployment remains at low levels though it has picked up of late. The seasonally adjusted rate stood at 4.5% in January 2024, up from a low of 4.0% in February of last year. This increase has been driven by growth in the labour force rather then weakness in employment growth. Further jobs growth will be somewhat constrained by labour shortages as the current pace of increase in the labour force is probably unsustainable.


Bank of Ireland is forecasting 3.0% growth in exports for 2024 and 5% in 2025. Exports have been the driver of the exceptional growth Ireland has seen over the past number of years, largely down to contract manufacturing in a small number of companies rather than the strength of the export sector as a whole. The outsized influence has turned around this year and is negatively impacting with export growth falling from 13.9% in 2022 to average -2.9% in the first three quarters of 2023.

While some of this weakness is down to some restructuring in pharmaceutical and ICT sectors in a post Covid landscape, most of the change in circumstances is restricted to the export of high tech goods, with goods exports down 7.4% in the first three quarters of the 2023 while services exports were up 2.1%.


House price inflation likely to remain in low single-digit territory in 2024 due to lack of supply, already evident in MyHome asking price inflation at 4%. Housing completions will grow to 34,000 units in 2024, supporting investment spending, but this is still well short of the 40-50,000 required to satiate demand.

Bottlenecks in housing will act as a constraint on growth sooner rather than later unless they are addressed. However, this is easier said than done with a great many competing areas for investment.


The retraction in ICT appears only to have affected Ireland around the margins and the sector remains in a robust position, although issues on the high tech manufacturing side is hampering goods exports growth, at least for now. Pharmaceutical companies had to reorganise post COVID – and this also appears to have impacted exports this year – but any slowdown here is likely to be very temporary as Ireland remains a world leading destination for medical/chemical/pharmaceutical companies.

Modest global growth is not a huge dampener given the Irish export mix and Bank of Ireland is forecasting the MNC sector to bounce back from a contraction of 6.6% in 2023 to 0.5% growth in 2024 and 5.2% in 2025. In the domestic sectors, slower but steady growth is the forecast, with the consumer contributing and investment, supported by continued home building, also chipping in and we see the indigenous sector expanding by about 2.5% in 2024 and 2025.