Central Bank lowers growth forecast to 2.7%

The Central Bank has lowered its growth forecast for the economy this year. It now expects the economy to grow by 2.7%, which is 0.5% less than its previous estimate. This change is largely due to the uncertainty from the ongoing trade war between the US and the EU. The bank also predicts fewer homes will be constructed than it estimated earlier. It expects about 35,000 housing units to be built this year, increasing to 40,000 next year and 44,000 by 2027. Last year, the bank stated that 70,000 homes should be built each year to meet housing demand and population growth. However, only just over 30,000 were completed in 2024. In its latest report, the Central Bank identified several issues affecting housing supply. These include low productivity in construction, delays in utility connections, slow planning processes, and a lack of available land in high-demand areas. While the bank acknowledged that the economy remains strong, it highlighted risks that could impede growth. These risks are linked to potential global tensions that could impact the Irish economy, which relies heavily on trade and foreign investment. The bank also mentioned that about €15 billion in corporate tax revenue from multinational companies might be at risk due to possible tariffs from the US. This situation could lead to a significant fiscal shock, affecting public finances and government spending. Finally, the Central Bank raised its inflation forecast for this year from 1.7% to 2.2%. This adjustment is due to rising energy prices and ongoing inflation in the services sector. The current level of uncertainty has been noted to be less severe than during the Covid-19 pandemic or Brexit.