The European Commission has revised upwards its forecasts for economic growth this year in Ireland.
In its Winter 2023 Economic Forecast, released today, the Commission predicts the economy here will grow in GDP terms by 4.9%, compared to its Autumn forecast of 3.2%.
Growth next year has been revised upwards to 4.1% compared to an earlier forecast of 3.1%.
The European Commission also predicts inflation here will moderate this year to 4.4% compared to an average 8.1% last year. It believes inflation will fall further to 2.1% next year.
The Commission says a 92% increase in investment, predominantly by multinationals, in the third quarter last year compared to the previous quarter contributed to “much stronger than anticipated” growth.
This delivered an estimated 12.2% increase in GDP in 2022.
The report says that despite recent announcements of job losses in some “big tech” companies, there has been “no visible negative impact” on Ireland’s labour market. It says employment in the multinational sector here increased by 9% last year.
The Commission also says high household savings combined with the strong labour market should underpin further growth in spending by consumers.
It says inflation is set to remain high at the beginning of this year but to fall off later in the year.
Uncertainty remains, however, around the Northern Ireland Protocol and it warns that the “performance of multinational corporations could swing growth in either direction”.
For the EU and euro areas taken as a whole, the Commission now believes the region’s economy will escape the recession predicted in November.
It has revised upwards its prediction for GDP growth in the EU this year to 0.8% and in the euro area to 0.9%.
It has lowered slightly its forecast for inflation in the EU this year to 6.4% and 5.6% in the euro area with inflation moderating further next year to 2.8% in the EU and 2.5% in the euro area.
It says the European economy has benefited from the price of gas falling below where they were before Russia invaded Ukraine.
It notes there has been a “sharp fall” in consumption and a diversification of the markets where gas is sourced. It also says the “resilience” of corporations and households “has been impressive”.
Meanwhile, the Commission also says the expected slowdown in economies in the third quarter of last year was not as bad as had been thought. Economies stalled but did not contract.
However, it says the EU economy is still “beset with challenges” with core inflation increasing last month and households and businesses still facing high energy costs.