2024 has now passed. On the economic front, it was a year characterised by declining inflation, very low levels of economic activity in the Euro Zone, with Germany particularly weak; a struggling Chinese economy; a UK economy that started the year well but faded as the year progressed; a US economy that surprised on the upside; and the commencement of significant interest rate cutting by many central banks.
On the political front, 2024 was a dramatic year with a record number of elections, many of which have immense global significance. However, the US election result and the re-birth of President Trump is the most consequential from both a global and domestic perspective.
It is impossible to focus on economic developments without bearing in mind the inordinate influence that political developments have on economic outcomes.
As Donald Trump commences his second term, he should be judged on what he does rather than what he says, but there is much to be concerned about. Isolationism was a feature of Trump’s first presidency and could be even more apparent in his second term, particularly if Elon Musk continues to exert such an influence. The driver of this approach is the ‘America First’ doctrine that drives ‘Maganomics’. This revolves around becoming more inward looking and framing all policies in a domestic context, rather than the global role that the US traditionally played.
Donald Trump is fundamentally anti-free trade and trade agreements. He has threatened tariffs of up to 20 per cent on all imports into the US; 60 per cent or higher on imports from China; and 25 per cent tariffs on imports from Mexico and Canada. The imposition of such tariffs would just result in higher prices for US consumers and businesses; and would obviously risk a retaliatory trade war between the US and all countries impacted by the tariffs. President Trump has suggested that he would cut the corporation tax rate from 21 per cent to 15 per cent; and that undocumented immigrants would be deported.
If any or all these policies were to be pursued it would result in a weaker global economy; a widening of the already very large US budget deficit with consequent global financial stability risks; higher prices; and a much more combative global geo-political environment.
From an Irish perspective, 2024 was a good year. Relative political stability was copper-fastened, and the economy generally performed well. The key positives included a strong labour market, strong growth in tax revenues, a solid aggregate household balance sheet, and a strong rebound in exports after a setback in 2023. The consumer side of the economy was pressurised due to the elevated cost of living after a couple of years of very high prices rises; and it was a challenging year for many SMEs, particularly in hospitality and retail. For SMEs, the cost of doing business was a challenge, particularly labour-related costs.
The labour market performance was particularly positive. In the year to end-September total employment in the economy increased by 98,600 or 3.7 per cent on a year earlier, to reach a new record high of 2.794 million. The employment rate, which is the share of persons in the total population aged between 15 and 64 years who are in employment, reached a record high of 75.3 per cent. The unemployment rate ended the year at 4.2 per cent of the labour force, down from 4.5 per cent at the end of 2023. This is virtually a full-employment level of unemployment and for many businesses, recruitment and retention was a significant business challenge.
The IDA had another solid year in terms of attracting foreign direct investment. At the end of 2024, companies supported by the IDA accounted for 302,566 direct jobs, which is 0.2 per cent higher than in 2023 and it accounted for 10.8 per cent of total employment. Modern manufacturing saw employment increase by 0.8 per cent; traditional manufacturing saw growth of 0.4 per cent; business, financial and other services increased by 1.7 per cent; and ICT saw a decline of 1.7 per cent.
Looking ahead to 2025, the key issues relevant to the wellbeing of the Irish economy largely emanate from outside the country. These include:
Ireland has an inordinate dependence on US multi-nationals in terms of direct and indirect employment, and income tax and corporation tax receipts. It remains to be seen what the Trump administration might do to further the ‘America first’ agenda, but the risks to Ireland are compelling. In some ways there is not a lot we can do to counter those risks other than deep diplomatic engagement; and to ensure that in vital strategic areas such as energy, water, education, and housing serious efforts are made to address the deficiencies. Hopefully, the new Government will prioritise these issues.
The Irish economy should continue to perform reasonably strongly over the coming year with growth of up to 4 per cent in modified domestic demand possible. The threats posed by the Trump presidency in 2025 and beyond will have to be watched very closely.
“The threats posed by the Trump presidency in 2025 and beyond will have to be watched very closely.”
In an otherwise generally healthy economic backdrop in 2024, consumer spending behaviour was quite cautious as the elevated level of consumer prices pressurised spending for many consumers.
In the first 11 months of the year, the volume of retail sales was 0.4 per cent higher than the equivalent period in 2023. When car sales are excluded, the volume of retail sales was 0.1 per cent lower than in 2023. The volume of retail sales of pharmaceutical, medical and cosmetic items was 1.4 per cent lower than the first 11 months of 2023.
The cost-of-living escalation is dampening consumer expenditure. Although the headline rate of inflation has fallen sharply from the highs of 2022 to one per cent in November, the average cost of living in November 2024 was 20.4 per cent higher than in November 2020. The table shows the annual percentage change in the price of a broad range of goods and services in November 2024, and the change in prices between November 2020 and November 2024. This demonstrates the cost-of-living pressures facing consumers. This cost-of-living escalation was a key theme in Budget 2025 and General Election 2024.
In the pharmacy sector, the average cost of pharmaceutical products in November 2024 was 4.3 per cent higher than four years earlier. Within this product category the cost of prescribed drugs declined by 0.8 per cent, and the cost of other medicines increased by 12.7 per cent. The level of inflation in the pharmacy sector is significantly more muted that in many other retail categories.
Table 1: Increase in selected consumer prices
| Annual % change Nov.2024 | % change Nov. 2020 – Nov. 2024 | |
| All items | 1.0% | 20.4% |
| Food | 1.8% | 21.6% |
| Clothing & Footwear | -7.5% | -2.1% |
| Private rents | 5.1% | 34.0% |
| Mortgage interest | 5.2% | 79.8% |
| Electricity | -8.3% | 54.9% |
| Gas | -8.0% | 92.9% |
| Transport | -1.6% | 23.4% |
| Petrol |
-3.6% |
27.0% |
| Diesel | -6.8% | 34.3% |
| Restaurants, cafes etc | 4.3% | 21.1% |
| Accommodation services | -0.3% | 51.0% |
| Hairdressing | 3.2% | 20.5% |
| Childcare | -20.8% | -37.4% |
| Insurance connected with health | 10.5% | 23.8% |
| Motor car insurance | 11.3% | -7.1% |
| Pharmaceutical Products | 3.0% | 4.3% |
| – Prescribed Drugs | 1.0% | -0.8% |
| – Other Medicines | 6.0% | 12.7% |
Source: CSO PxStat
Jim Power is an independent economist and co-host of The Other Hand podcast.
Jim Power
Economist
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