NERI Report Series number 25 by NERI Co-director, Dr. Tom McDonnell describes the current economic situation in the Republic of Ireland.
The economy is at, or close to, capacity with record employment and hours worked. However, the post-pandemic boost from pent-up demand is coming to an end. Indeed, growth in output and employment will be more muted over the next year.
There are a number of headwinds including tight monetary policy, weak consumer and business confidence, and weak growth prospects in each of our main trading partners. Even so, a tight labour market combined with declining price inflation will generate positive real wage growth. The growth in real disposable income will support demand in the economy.
The economy is facing a series of challenges over the next 20 years. Budget 2024 should be a strategic budget that recognises the significant fiscal costs of these challenges - ageing, climate action, technological disruption, changing trade and FDI patterns. In particular, Budget 2024 should not be procyclical and short-sighted tax cutting should be avoided. Windfall gains should be saved.