Ireland’s economy is ahead of the EU as war in Ukraine clouds prospects

Ireland’s economy is set to grow twice as fast as the EU average this year and almost three times as fast next year as the war in Ukraine takes its toll on the continent.

he European Commission’s latest economic forecast projects Ireland’s gross domestic product (GDP) to grow by 5.3 percent this year and 4 percent 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 the Eurozone are much stricter.

EU GDP is projected to grow 2.6 percent in 2022 – a slight downward adjustment – but fall to 1.5 percent in 2023, more than a point lower than forecast in the spring.

The euro zone is expected to grow just 1.4 percent next year, compared to 2.3 percent forecast three months ago. Growth forecasts for this year were kept at 2.7 percent.

Irish inflation is expected to average 7.3% this year – more than a point above the Commission’s spring estimates – and 3.3% next year, a slight upward revision.

It will remain below the EU and eurozone average, which will rise to 7.6 percent in the 27-member EU and 8.3 percent in the euro zone this year, the commission predicts.

In 2023, EU inflation is expected to reach 4.6 percent, while eurozone prices are expected to rise by an average of 4 percent.

Inflation forecasts for the EU and the Eurozone have been revised upwards by well over a point due to large price spikes in several Eastern European countries as well as in 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 face challenges on multiple fronts, from rising energy and food prices to a highly uncertain global outlook.

“With high inflation and tightening financing conditions, it will be important to find the right balance between a more cautious 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 “surrounded by high uncertainty and downside risks”.

The forecast also included a warning about Ireland’s GDP and investment figures, which boosted EU growth by nearly half a point in the first quarter.

“The high volatility of Ireland’s GDP (and some of its demand components) is not new, but has increased significantly over the past decade as the weight of foreign multinational corporations (MNEs) has increased,” said the European Commission.

“Ireland is not the only EU Member State to have foreign-owned MNEs, but their weight in Ireland is such that it affects the ‘standard’ national accounts aggregates for both the Irish economy and the US the EU economy as a whole.” Ireland’s economy is ahead of the EU as war in Ukraine clouds prospects

Fry Electronics Team

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