Central Bank revises up economic growth forecast to 3.8%

The Central Bank of Ireland has raised its growth forecast for the Irish economy to 3.8% this year and 3.4% for 2027. The increase is attributed to a surge in demand for software and data centre equipment from multinational corporations due to the growth of artificial intelligence. Strong consumer spending and the highest savings rate among Eurozone countries are also contributing factors. The bank's growth forecast would deliver employment growth, higher incomes, and increased government revenue.

However, the bank advises the government against adding any further stimulus in the upcoming Budget, urging adherence to the spending limits outlined in the Summer Economic Statement. This recommendation aims to limit exposure to volatile corporation tax receipts concentrated among a few multinational firms.

The Central Bank has also revised downward its forecast for the number of homes built this year, anticipating only 39,500 homes compared to its previous estimate of 40,000. They predict 41,000 homes will be constructed next year, and 45,000 in 2028, both lower than previous estimates. The slowdown in housing deliveries is attributed to developers facing challenges in obtaining water and electricity connections for construction sites.

The bank urges the implementation of reforms to expedite the delivery of key national infrastructure to support housing demands.

With population growth now at the higher end of projections, the Central Bank anticipates an increase in demand for housing, potentially requiring over 50,000 homes to be built annually to meet this demand.