The investment bank is also predicting Ireland’s national income will grow by 4pc-5pc per annum over the coming three years – a far more upbeat forecast than those of the Central Bank, ESRI or Department of Finance, which have been about 2.8pc.
Davy thinks the likelihood of a need for fiscal tightening by the Government is small, given the strength of Ireland’s balance sheet. Net debt is expected to fall to 40pc of national income this year, which is “unrecognisable from forecasts of 90pc as recently as April 2021”, the investment bank points out.
Its forecasts on housing output are the most eye-catching, given that they coincide with a far more downbeat prediction by the ESRI, which expects 35,000 housing units to be completed this year and only 36,000 next year.
Davy has made a slight downward revision to its forecast for housing output this year, from 37,500 to 36,000, but continues to expect a strong increase in 2026 and 2027.
“We [see] a number of data points suggesting cause for optimism as a result of new policy initiatives introduced by the Government this year to stimulate homebuilding and infrastructure delivery,” said Kevin Timoney, Davy’s chief economist.
“We continue to see a significant pipeline of new homes that can be delivered in 2026 and 2027, assuming these policies are implemented in full.”
Davy also thinks the construction sector could be in line for a significant boost in the coming years, through the combined impact of the revised national planning framework, the reforms to the rental sector, the updated National Development Plan and the new design standards for apartments.
Its forecast on job creation is also more optimistic than the norm, as Davy goes against the common narrative that labour supply will be reduced due to slower population growth. It expects participation rates in the workforce will go even higher, driven especially by more women taking up jobs.
“We see headroom for higher participation for many female age groups over the next number of years. This would bring about further convergence between Ireland’s female labour force participation and that seen in many other high-income countries,” Davy says.
It also expects higher participation by older males, with one factor being that some workers do not own their own homes or have not made enough provision for their pension.
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