Finance | Ireland’s economic performance within the EU

To ask the Minister for Finance the degree to which Ireland continues to perform well within the European Union from an economic perspective; and if he will make a statement on the matter.

REPLY

As it stands, Ireland remains one of the strongest performers in the European Union. Irish exports recorded a robust start to 2022, with a continued strong performance in the multinational sector. The Irish modified current account, which strips out the distorting effects of globalisation, is in a very strong position and is expected to remain in surplus over the medium term. The Irish labour market has also remained resilient, with the unemployment rate of 4.7 per cent in May the lowest since 2006.

Within a European context, Ireland’s economic recovery from the pandemic has been particularly remarkable. Modified domestic demand – a measure of the domestic economy – was almost 6 per cent above its pre-pandemic level in the first quarter of 2022, whilst domestic demand for the EU as a whole remains broadly in line with pre-pandemic level.  

However, Ireland and our fellow EU member states are currently facing significant headwinds to economic growth. Russia’s invasion of Ukraine represents a large supply-side shock to the domestic economy, with the main channel of transmission from the war to the Irish economy coming via the sharp rise in energy and other commodity prices.

Consumer price (HICP) inflation picked up sharply over the second half of last year and stood at 8.3 per cent in May. Almost every advanced economy in the world is in the same position, with euro area inflation reaching a record 8.1 per cent in May.

Taking account of all factors, the international environment is one of exceptional uncertainty and there are significant risks to the economic outlook for Ireland, as well as for the EU. The war in Ukraine presents a serious headwind to economic activity, with rising inflation and widespread uncertainty posing a threat to consumer spending and business investment throughout Europe.