Ireland’s economy is set to grow at twice the EU average this year and almost three times as fast next year, as the war in Ukraine takes its toll on the continent.
The European Commission’s latest economic forecast sees gross domestic product (GDP) expanding at 5.3pc in Ireland this year and 4pc next year.
The figures include a slight downward revision this year, compared to the Commission’s spring forecast, and almost half a percentage point for 2023.
The revisions for the EU and eurozone are much more severe.
EU GDP is set to expand by 2.6pc in 2022 – a slight downward adjustment – but is set to fall to 1.5pc in 2023, more than a point lower than it predicted in spring.
The eurozone is now set to grow by just 1.4pc next year, compared to 2.3pc predicted just three months ago. Growth forecasts for this year were maintained at 2.7pc.
Irish inflation is set to average 7.3pc this year - more than a point ahead of the Commission’s spring estimates - and 3.3pc next year, a slight upward revision.
It will remain below the EU and eurozone average, which will spike to 7.6pc in the 27-member EU this year, the Commission forecasts, and 8.3pc in the eurozone.
In 2023 EU inflation is predicted to hit 4.6pc, while eurozone prices are set to rise by 4pc on average.
The EU and eurozone inflation forecasts have been revised up by well over a point on the back of large price spikes in several eastern European countries, as well as Germany, Belgium, Spain and the Netherlands.
“Russia's war against Ukraine continues to cast a long shadow over Europe and our economy,” said Commission vice-president and trade chief Valdis Dombrovskis.
“We are facing challenges on multiple fronts from rising energy and food prices to a highly uncertain global outlook.
“In view of high inflation and tightening financing conditions, it will be important to find the right balance between moving towards a more prudent fiscal stance and protecting the most vulnerable. We should also reduce our dependence on Russian fossil fuels.”
Economy commissioner Paolo Gentiloni said the forecast was “subject to high uncertainty and downside risks”.
The forecast also contained a warning on Irish GDP and investment figures, which drove EU growth up by almost a half a point in the first quarter.
“Large volatility in Irish GDP (and some of its demand components) is not new, but it has increased substantially over the past decade as the weight of foreign-owned multinational enterprises (MNEs) progressively rose,” the European Commission said.
“Ireland is not the only EU Member State hosting foreign-owned MNEs, yet their weight is so large in Ireland that it affects ‘standard’ national accounts aggregates for both the Irish economy and the EU economy at large.”