Global Economic Outlook – September 2022 Ireland: Recent momentum, stumbles against headwinds Ireland enjoying very strong Cost of living pressures eroding Bottlenecks and gaps in supply economic growth, but some disposable incomes. Government of infrastructure, housing, and uncertainty remains as to well-positioned to help cushion utilities are hampering growth strength and robustness. impacts of price increases. and competitiveness. Ireland’s economy has been performing strongly for a Table 14: KPMG forecasts for Ireland number of years, and was one of a small number of 2021 2022 2023 countries to experience growth during the pandemic. As with most countries in Europe, Ireland is facing global GDP 13.4 7. 0 4.5 downturn risks and a major cost of living challenge. Inflation 2.5 7. 5 4.0 Domestically, infrastructure bottlenecks are a further barrier to growth. These three core themes drive Ireland’s Unemployment rate 6.2 4.5 4.5 economic prospects for the remainder of 2022 and Source: CBI, CSO, DOF, EC, ESRI, KPMG analysis. into 2023. Note: Average % change on previous calendar year except for unemployment rate, which is average annual rate. Inflation measure used is the HICP. Global-domestic interdependencies have been key drivers of Ireland’s economic fortune over the past two decades. On the upside, the country’s skilled and open labor market, Secondly, two economies are present – the multinational- talent pipeline, and easy access to both the European driven economy and the domestic economy – and growth of and UK market, are all likely to contribute to growth over the former consistently outpaces growth of the latter. At the the coming years. Ireland’s strong industrial base in key same time, multi-nationals (MNCs) have been increasingly sectors – in particular in Life Sciences and ICT – both investing in regions outside Dublin, helping to improve the owes and lends itself to multi-decade long investment by balance of economic growth across the country. multi-nationals. Foreign direct investment (FDI) appetite remains strong post-pandemic and post-Brexit, and further investment can be expected in the medium-term, positioning Ireland well to take advantage of wider long- term trends in global economic growth. On the downside, there are a number of clear and present headwinds. Firstly, Ireland’s close trading relationship with the EU, the UK, and the U.S. – each at risk of recession – creates risks of a downturn if lower demand in these three economies creates negative spill-over effects. To mitigate risks of contagion from key trading partners, Ireland’s export-focused economy has become increasingly diversified, but it is unlikely to be sufficient to fully insulate the country from such shocks. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 41