Davy doubles growth forecast for Irish economy on ‘less challenging’ global outlook

Davy Stockbrokers has doubled its growth forecast for the Irish economy on the back of a stronger-than-expected performance last year, falling energy prices and a “less challenging” global outlook.

The firm said it expected Irish GDP (gross domestic product) to grow by 6.9 per cent this year, up from a previous forecast of 3.5 per cent, and by 5 per cent next year.

The rosier outlook stemmed from a stronger-than-anticipated output from the multinational and indigenous sectors at the end last year. It also noted that retail sales and employment had held up better than expected, with GDP rising by 3.5 per cent in the final quarter of last year.

Short-term indicators pointed to a more “resilient economy”, Davy chief economist Conall MacCoille said, while warning a squeeze on real incomes would act as a brake on consumer spending.

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According to figures released by the Central Statistics Office (CSO) on Monday, the Irish economy grew by 12.2 per cent in GDP terms last year, the fastest level of expansion seen anywhere in the EU.

Davy said it expected inflation to average 4.7 per cent this year, down from 5.6 per cent previously, due to lower energy prices, helping the outlook for consumer spending, which is forecast to expand by 2.2 per cent in 2023.

The firm also noted that the global outlook looked a little less challenging with Europe “potentially avoiding a recession” contrary to predictions just a few months ago.

Davy said the multinational sector will see a sharp 9.2 per cent gain in 2023 with exports also up 9 per cent, while output across indigenous sectors would see a more gradual 3.7 per cent rebound. However if a recent fall in natural gas prices to €60 per megawatt/hour is passed through to consumers quickly, the increase could be sharper, it said.

Also, activity and employment in hospitality, retail, tourism and transport following the pandemic may “come through faster”.

While Davy said it expected house price inflation to remain positive this year at 4 per cent, with the impact of looser Central Bank lending rules boosting the market, Mr MacCoille said the firm was predicting a fall-off in new home completions in 2023, with last year’s total of 29, 851 falling back 27,500 this year on the back of a recent fall-off in housing starts.