A “better-than-expected international outlook and robust domestic growth” will propel the economy's performance during the next several months, according to the Institute's latest quarter economic analysis.

A projected 3% rise in real income is predicted to drive growth in modified domestic demand (MDD), a gauge of domestic economic activity, by 2.2% this year and 2.5% in 2025.

According to ESRI predictions, inflation will continue to decline, falling to 2.3% in 2024 and then even lower to 1.9% the following year. Unemployment is also expected to follow a similar pattern, declining from 4.1% to 4%.

The ESRI lists “continued tensions in the geopolitical situation” in Europe and Asia as one of the reasons endangering the anticipated economic growth. If these tensions worsen, they “could have significant implications for a small open economy such as Ireland's.”

Furthermore, the commentary labels the problem of “capacity constraints” as “critical,” stating that “an upward revision in house supply targets will be needed to cater for demographic demand for housing,” according to recent statistics from the Housing Commission.

Although the supply of housing is on an “upward trajectory,” the ESRI recognises that more housing has to be supplied at a faster rate in order to keep up with demand.