Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I propose to take Questions Nos. 69 and 237 together.

The economic performance across the EU and Ireland was somewhat subdued last year amid weak global trade and GDP growth. In 2023, GDP grew by a modest 0.4% in the euro area and EU, while Irish GDP recorded a contraction of 3.2%. GDP growth in the euro area and Ireland is projected to pick up this year, though remaining below historical growth rates. The European Commission is projecting euro area and Irish GDP growth of 0.8% and 1.2%, respectively, for this year.

There are no inaccuracies in the way that Irish GDP is calculated, and it is measured in the same way here as it is measured across all European countries under the European system of national accounts. However, as is well-documented, GDP is not a suitable measure to be used in assessing the living standards of Irish residents, and my Department has been proactive in highlighting this fact. Indeed, last year was a perfect case in point, with measures of domestic economic activity, such as modified domestic demand, MDD, consumer spending and employment all showing growth, and GDP recording a decline. This is why my Department and many other institutions use measures such as modified GNI, that is, GNI*, and MDD that strips out the main globalisation-related distortions from GDP.

My Department is forecasting MDD growth of 1.9% for this year and 2.3% next year. This is in line with European Commission projections of 1.7% and 2.4% MDD growth for 2024 and 2025 in its recently published spring forecasts. There remains significant uncertainty surrounding the outlook for the international economy, however, and Ireland, which is highly integrated into the international economy, is facing many of the same headwinds as our European peers. Although inflation continues to ease, there remains the risk of renewed energy shocks adding to inflationary pressures. An escalation of geopolitical tensions would also have negative implications for both Irish and European economic growth.

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