The Irish economy is set to grow by 5.4 pc in 2022 and 4.4 pc next year, the European Commission predicts, well above the EU and Eurozone averages.
This year has the second fastest growth rate in the bloc, after Portugal, with Ireland set to resume the top spot in 2023.
This follows a massive 13.5pc growth in 2021 due to pharma and IT exports during the pandemic.
Revised domestic demand, which excludes volatile multinational transactions, is expected to grow to 4.6 pc in 2022 and 3.8 pc in 2023.
Irish inflation average this year will be 6.1 pc, the Commission predicts, similar to the Finance Department’s 6.2 pc estimate and on par with the Eurozone average. The commission said inflation will slow to 3.1 percent in 2023.
Lithuania, Bulgaria, Czechia, Estonia and Poland will see double-digit price increases this year, the commission said, although average inflation will slow to 2.7 pc in the eurozone and 3.2 pc in the EU in 2023. The European Central Bank’s target is 2 pc.
Growth in the 27-member EU and 19-country euro area is set to come in at 2.7pc this year and 2.3pc in 2023, a significant cut from previous forecasts because of the war in Ukraine.
“Russian invasion of Ukraine is causing untold suffering and destruction, but it is also affecting Europe’s economic recovery,” said the commission’s head of economy, Paolo Gentiloni.
“The war has raised energy prices and further disrupted the supply chain, leaving inflation set to remain high for longer periods of time.
He said strong EU growth of 5.4 pc last year was driving positive growth in 2022, but added that the forecast was “subject to high uncertainty” as a result of the Ukraine war.
“Other scenarios are possible under which growth could be lower and inflation could be higher than it is today,” he said.
The commission said in its forecast that Ireland’s risk to war is modest but that growth could be stymied by price and supply effects.
“Ireland’s direct economic risk to Russia and Ukraine is modest, as a highly open economy it is exposed through increased trade and supply chain linkages as well as rising inflation, which lowers real household incomes.”
Unemployment in Ireland will fall to 4.6 percent this year and 5 percent next year, one of the lowest rates in the 27-member EU, and well below the EU and eurozone average of 6-7 percent.
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 shows Ireland as one of four countries to move into a modest budget surplus in 2023, along with Luxembourg, Denmark and Sweden.
Government debt in Ireland is set to be the lowest in the bloc with 50.3 percent of GDP this year and 45.5 percent in 2023.
However, the Commission estimates that private consumption is likely to decline in the short term, rising to 5.7 per cent in 2022 and 4.1 per cent in 2023.
The commission said investment could also be hit by wartime uncertainty and supply constraints, as the construction sector grapples with labor and material shortages.
“In the current environment in Ireland, companies may postpone further acquisitions,” the forecast said.