Bernard Durkan (Kildare North, Fine Gael)
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55. To ask the Minister for Finance to indicate the extent to which this country’s economy continues on a stable footing, notwithstanding any potential threat; and if he will make a statement on the matter. [45466/24]

Bernard Durkan (Kildare North, Fine Gael)
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83. To ask the Minister for Finance how he sees this country’s economy progressing and comparable to other EU economies; and if he will make a statement on the matter. [46047/24]

Jack Chambers (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 55 and 83 together.

The Irish economy is in relatively good shape at an aggregate level, reflecting the easing in inflation and the solid growth in the domestic economy over recent quarters. The brightest spot in the Irish economy has undoubtedly been the labour market. There were over 2.75 million people in employment in the second quarter of 2024 as participation rates reached a record high. The unemployment rate also remains low by historical standards and consistent with full employment.

Inflation has fallen rapidly throughout the year, with headline inflation at or below 2 per cent since March. The fall in inflation has largely been driven by energy price decreases, however domestic price pressures have also eased over recent months.

Looking ahead, real income growth should support a continued expansion of consumer spending this year and next. Indeed, consumer spending is expected to act as the primary driver of growth in the domestic economy. My Department now forecasts Modified domestic demand (MDD), the preferred measure for the domestic economy, to grow by 2.6 per cent for this year and 2.9 per cent next year.

From a comparative perspective, there was subdued growth (0.4 per cent) in the European economy last year. While growth has picked-up somewhat this year, the outlook remains relatively muted. This is reflected in recent high frequency indicators with Eurostat’s preliminary flash estimates for the third quarter pointing to EU growth of 0.3 per cent.

Overall, the IMF project growth to rebound to 1.1 per cent in the EU this year, as inflation continues to decline, services activity is strong, and trade has rebound. However, the large dispersion in growth rates across member states is expected to continue, with forecasts ranging from 5 per cent in Malta to a 0.9 per cent contraction in Estonia.

The IMF expect economic activity in Ireland to shrink by 0.2 per cent in 2024. As GDP is an unreliable indicator in an Irish context, MDD and consumer spending as well as labour market conditions outlined above provide a better insight into the domestic economy.

Notwithstanding these positive developments, there of course remains uncertainty surrounding the growth outlook. Risks to the near-term outlook are two-sided. On the domestic side, demand could be stronger-than-assumed which could result in overheating pressures. On the external side, developments in the global economy remain a key source of risk to the Irish growth outlook. The most pressing risks are the potential for weaker global demand, or slowdowns in global trade. These affect Ireland in particular due to the concentrated nature of the multinational sector.

In this context, it remains important to monitor developments, to ensure the sustainability of the public finances, and to deliver structural reforms to improve our competitiveness and boost productivity.