The slowdown in multinational exports that arose largely from a hit to the pharmaceutical sector last year is likely to have been temporary, according to Bank of Ireland in its latest Economic Outlook.
The export slowdown contributed in large part to the economy here going into a technical recession in Gross Domestic Product (GDP) terms in the last year.
The report also notes that the retraction in the Information and Communications Technology (ICT) sector affected Ireland 'around the margins' and that the industry remained in a robust position, albeit with issues on the high tech manufacturing side which has also hampered goods exports.
"Modest global growth is not a huge dampener given the Irish export mix and Bank of Ireland is forecasting the MNC (multinational) sector to bounce back from a contraction of 6.6% in 2023 to 0.5% growth in 2024 and 5.2% in 2025," Conall MacCoille, chief economist with Bank of Ireland, noted.
"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," he added.
The bank is forecasting GDP growth of 1.5% this year - which represents a downwards revision on prior forecasts - and 4% next year.
It notes that the distortions from MNCs and 'contract manufacturing' - which artificially pushed up on GDP growth in 2022, but down in 2023 - have now played out.
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
"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," Mr Mac Coille explained.
"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."
The bank is forecasting consumer spending growth of 2.9% this year as inflation falls back closer to the 2% target level and jobs growth of 1.5% sustains spending in the economy.
The bank believes inflation will average at around 2.5% for the year, but notes that the timing and pace of energy price cuts adds a degree of uncertainty.
Housing completions, it estimates, are likely exceed last year's completion numbers and grow possibly to 34,000 units, with house price inflation remaining in 'low single digits'.
The unemployment rate is likely to remain close to 4.5%, but the bank warns that it could rise if the labour force grows more rapidly due to inward migration.
Employment growth is likely to slow to 1.6% - less than half the 3.8% growth recorded last year.
However, skills and labour shortages will support wages with growth of over 4% this year, it notes.
