Quarterly Economic Outlook Q2 2023

The Irish economy has continued to perform remarkably during a period of rising interest rates and inflation globally. Almost all recent indicators of performance have shown an economy  outperforming its peers. Whilst the pipeline of investment and demand remains relatively strong, there is also an increasing sense that we may be entering a period of more moderate growth. Over the coming year the economy will experience a mix of natural slowdown following bounce back demand in 2022, the lagged impact of rapid interest rate hikes, the gradual withdrawal of fiscal supports and vulnerabilities in some major trading partners. Whilst the massive volatility of recent years of lockdowns, supply chain crises and inflation will soon be behind us, all the challenges above will contribute to a softening of the macroeconomic environment.

We are now nearing the peak of the economic cycle. In these periods it is crucial to be cognisant of our vulnerabilities. Already costs are a more prominent concern for businesses than in recent  years. There are also signs of ongoing caution from households despite strong buffers for some. Government should also be more aware of fiscal concentration, despite significant surpluses. It is important that we do not build top-of-cycle assumptions into either Government or business decision making.

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