Ireland’s domestic economy expanded 0.5% in 2023, far below the Department of Finance's expectations of 2.2%, it was reported on Friday.
Due to the large multinational sector distorting gross domestic product (GDP), officials generally use modified domestic demand (MDD) to gauge the strength of the economy.
The MDD contracted 0.4% quarter-on-quarter from October to December last year.
GDP, still used to calculate Ireland’s activity in the Eurozone, contracted by 3.4% quarter-on-quarter in the same period.
The initial estimate was -0.7%.
It contracted 3.2% in 2023 having grown by 9.4% the previous year, according to the Central Statistics Office (CSO).
Modified domestic demand grew in 2022, up 9.5% due to a post-pandemic rebound in spending.
A 15.9% surge in modified investment was seemingly due to workers returning to offices and manufacturing projects.
In October, the finance ministry forecast a 0.2% decline in modified investment in 2023. The actual outcome was a 7.1% fall.
However, a 3.1% increase in personal consumption last year was largely in line with expectations.
Employment in Ireland grew by 3.4% year-on-year in 2023.
‘Easing Of Inflation’
The Minister for Finance Michael McGrath TD said the combination of consumer spending and the strength of the labour market were “a good measure of the underlying health of the domestic economy.”
McGrath added, “Today's data show that consumer spending was flat at the tail-end of last year – with the tightening of monetary policy weighing on spending.
“In this context, I would highlight the easing of inflation – to 2.2% in February, its lowest rate since July 2021 – which will help support the purchasing power of households and underpin spending over this year.”
The financial department recently forecast modified domestic demand growth of 2.2% for this year.
This was supported by a similar rate of consumption growth to 2023 and flat modified investment
The department will update those forecasts next month.
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