Irish economy to grow 4.9pc this year as EU narrowly avoids recession, Commission says

Irish gross domestic product is set to come in at 4.9pc in 2023 – more than a point ahead of November projections – and 4.1pc in 2024, the Commission said.

It follows estimated growth of 12.2pc last year, more than four points ahead of previous forecasts.

Growth in the rest of the bloc will be more subdued, with the effects of Russia’s almost year-long war against Ukraine still taking its toll.

The EU and euro area economies narrowly avoided a contraction in the fourth quarter last year thanks to strong Irish growth, with GDP for 2022 estimated at 3.5pc in both zones.

Growth in the 27-member EU is predicted to fall back to 0.8pc this year, with the 20-country euro area set to expand by 0.9pc – around half a point higher than the most recent forecasts.

The growth rate for 2024 remains unchanged at 1.6pc in the EU and 1.5pc in the euro area.

“The EU beat expectations last year, with resilient growth in spite of the shockwaves from the Russian war of aggression,” said Commission economy chief Paolo Gentiloni.

“And we have entered 2023 on a firmer footing than anticipated: the risks of recession and gas shortages have faded and unemployment remains at a record low. Yet Europeans still face a difficult period ahead. Growth is still expected to slow down on the back of powerful headwinds and inflation will relinquish its grip on purchasing power only gradually over the coming quarters.”

Inflation has been revised slightly downwards compared to the most recent forecast in November, thanks to lower energy prices.

EU inflation is expected to fall from 9.2pc last year to 6.4pc this year and to 2.8pc in 2024.

In the euro area, it is projected to slow from 8.4pc last year to 5.6pc in 2023 and to 2.5pc in 2024.

In Ireland, inflation is estimated to have reached 8.1pc last year, but is predicted to fall to 4.4pc in 2023 – well below the 6pc previously forecast – and 2.1pc in 2024, on average.

Job growth in Ireland is set to remain strong, despite layoffs by some tech companies, the Commission said.

Job growth, alongside continued “very high” household savings and strong foreign investment will underpin growth this year, the forecast said.

But Brexit and the effects of multinationals’ intellectual property decisions make the outlook uncertain.

“Ireland’s economic outlook remains subject to uncertainty due to trade developments related to the implementation of the Protocol on Ireland/Northern Ireland,” the EU’s forecast said.

“Furthermore, the performance of multinational corporations could swing growth in either direction.”