| 17.2°C Dublin

Irish economy to grow 5.4pc this year despite 6.1pc inflation – EU

Close

Paolo Gentiloni, European Commissioner for Economy, during a news conference following a Eurogroup meeting of European Union (EU) finance ministers in Brussels, Belgium, on Monday, Nov. 8, 2021. European Central Bank Chief Economist Philip Lane said the euro region’s bout of “unexpectedly high” consumer-price increases doesn’t herald the sort of problem that global economies faced in the 1970s. Photographer: Valeria Mongelli/Bloomberg

Paolo Gentiloni, European Commissioner for Economy, during a news conference following a Eurogroup meeting of European Union (EU) finance ministers in Brussels, Belgium, on Monday, Nov. 8, 2021. European Central Bank Chief Economist Philip Lane said the euro region’s bout of “unexpectedly high” consumer-price increases doesn’t herald the sort of problem that global economies faced in the 1970s. Photographer: Valeria Mongelli/Bloomberg

Paolo Gentiloni, European Commissioner for Economy, during a news conference following a Eurogroup meeting of European Union (EU) finance ministers in Brussels, Belgium, on Monday, Nov. 8, 2021. European Central Bank Chief Economist Philip Lane said the euro region’s bout of “unexpectedly high” consumer-price increases doesn’t herald the sort of problem that global economies faced in the 1970s. Photographer: Valeria Mongelli/Bloomberg

The Irish economy is to grow 5.4pc in 2022 and 4.4pc next year, the European Commission predicts, well above EU and eurozone averages.

It is the second-fastest growth rate in the bloc this year, after Portugal, with Ireland set to resume the top spot in 2023.

It follows massive growth of 13.5pc in 2021 on the back of buoyant pharma and IT exports during the pandemic.

Modified domestic demand, which strips out volatile multinational transactions, is expected to expand by 4.6pc in 2022 and 3.8pc in 2023.

Irish inflation will average 6.1pc this year, the Commission predicts, similar to the 6.2pc estimate from the Department of Finance and equal to the eurozone average. Inflation will slow in 2023 to 3.1pc, the Commission said.

Lithuania, Bulgaria, Czechia, Estonia and Poland will post double-digit price rises this year, the Commission said, although average inflation will slow to 2.7pc in the eurozone and 3.2pc in the EU in 2023. The European Central Bank’s target is 2pc.

Growth in the 27-member EU and 19-country euro zone is set to come in at 2.7pc this year and 2.3pc in 2023, a significant cut to previous forecasts, due to the war in Ukraine.

“Russia's invasion of Ukraine is causing untold suffering and destruction, but is also weighing on Europe's economic recovery,” said Commission economy chief Paolo Gentiloni.

“The war has led to a surge in energy prices and further disrupted supply chains, so that inflation is now set to remain higher for longer.

He said strong EU growth last year of 5.4pc was driving positive growth in 2022, but said the forecast was "subject to high uncertainty” as a result of the Ukraine war.

“Other scenarios are possible under which growth may be lower and inflation higher than we are projecting today,” he said.

Ireland’s exposure to the war is minor but growth could be hit by price and supply effects, The Commission said in its forecast.

“Ireland’s direct economic exposure to Russia and Ukraine is minor, as a highly open economy it remains exposed through trade and supply chain linkages, as well as through rising inflation, which erodes real household incomes.”

Unemployment in Ireland will fall to 4.6pc this year and 5pc next year, one of the lowest rates in the 27-member EU, and below the EU and eurozone averages of 6-7pc.

Business Newsletter

Read the leading stories from the world of business.

This field is required

Ireland’s budget deficit will be the third-lowest in the EU this year, when measured against gross domestic product (GDP), the EU predicts.

The forecast also shows Ireland as just one of four countries to move into a slight budget surplus in 2023, along with Luxembourg, Denmark and Sweden.

Government debt in Ireland is set to remain amongst the lowest in the bloc at 50.3pc of GDP this year and 45.5pc in 2023.

However, the Commission predicts private consumption is likely to decelerate in the short term, growing by 5.7pc in 2022 and 4.1pc in 2023.

Investment could also be affected by wartime uncertainty and supply bottlenecks, the Commission said, with the construction sector grappling with labour and material shortages.

“In the current environment companies in Ireland might tend to postpone further acquisitions,” the forecast said.


Most Watched





Privacy