Declining inflation will have a positive impact on wage growth in Ireland as the EU Commission is also forecasting a healthy budget surplus this year and in 2025, Irish Examiner reports.
On the eve of this year’s general election, the EU Commission predicts that even though government revenue growth will fall, the Treasury will deliver a significant budget surplus this year and into 2025.
Ireland’s economic report, which forms part of the pan-European economic forecast, said:
“In 2025, based on unchanged policies, revenue and expenditure growth rates are projected to revert to their long-term trend, with a broadly neutral impact on the budget surplus estimated at 1.2%.”
The report also reveals that “soaring revenue growth has matched increases in public sector wages and investment” in 2023. The forecast comes after business groups, and hotel companies in particular, focused on rising costs, including labour costs.
Inflation in Ireland will average 1.9 per cent this year, down from 5.2 per cent in 2023, but it may change little to 1.8 per cent in 2025.
The commission’s forecasts expect the domestic economy to grow by 1.7 per cent this year and 2.4 per cent in 2025, as measured by changes in domestic demand, helping to avoid distortions in the national accounts caused by the large number of multinationals based here.
Growth in global exports is likely to be encouraging, with multinationals paying the lion’s share of the nearly €24bn collected by the government in corporate tax revenues last year. The Commission forecasts that GDP will grow by 1.2 per cent this year and expand by 3.6 per cent in 2025 after declining in 2023.
Unemployment rate at record low level
Meanwhile, the forecast assumes that the unemployment rate will remain at a historically low level for the state – 4.4%. Growth in the Irish economy in terms of GDP will equal the 1 per cent growth that will occur across the EU this year, according to forecasts.
Ireland will be one of the few eurozone economies with a budget surplus. However, the Commission said its projections assume the Ukraine war, the number of refugees from Ukraine, and the belief that the fighting in Gaza will “not geographically escalate.”
