Ireland needs higher domestic investment for future resilience

Ireland has experienced a decade of subdued domestic investment since the financial crisis, contributing only 20 percent to potential output growth, half its historical average.

Public investment sharply contracted after the fiscal crisis, leading to strained infrastructure in housing, energy, transport, and water.

Household investment remains below historical averages, primarily due to a slow recovery in housing supply, with 36,500 new homes last year falling short of the estimated 50,000-55,000 annual demand.

Indigenous business investment, at €7,500 per employee, is 25 percent below the EU average, particularly in knowledge-based capital.

This weakness is driven by cautiousness and uncertainty, rather than credit constraints, with one in two Irish SMEs citing uncertainty as a key barrier.

Ireland faces profound structural transitions requiring significant investment.

Demographic changes, including a rapidly ageing population, are expected to slow the economy's potential growth rate to around 1.2 percent by 2050. A fragmented global economy necessitates infrastructure investment to maintain Ireland's attractiveness for foreign direct investment.

Mitigating climate change demands substantial capital allocation for decarbonisation, clean energy, and adaptation.

The ongoing wave of digitalisation, particularly artificial intelligence, also requires investment for technology adoption and further innovation to boost productivity and economic growth.