Finance | Update on the economy and competition with other European countries
To ask the Minister for Finance if he remains satisfied that the economy remains on a solid footing, with particular reference to the need to compete with other European countries in terms of stability and growth; and if he will make a statement on the matter.
The world is facing into a period of lower economic growth, with many of Ireland’s key trading partners likely to see sluggish if not negative growth in the coming quarters. This is a direct result of Russia’s invasion of Ukraine and the restriction on gas supplies, which has led to multi-decade high inflation rates in Ireland and the euro-area more broadly.
With consumer spending and SME investment facing into multiple headwinds of inflation, rising interest rates and a weak trading environment, modified domestic demand (MDD) – a proxy for the domestic economy – is forecast by my Department to grow by 1¼ per cent this year. While this is low relative to non-Covid years, it compared favourably with trading partners, with the OECD projecting economic growth of just ½ per cent for the euro area for 2023 and negative growth in the UK.
However, despite the weaker global outlook for 2023, Ireland remains on a relatively strong economic footing. The number of people in employment was recorded at 2½ million in the third quarter of last year, a record level, while the unemployment rate stood at just 4.3 per cent in December – close to the lowest on record.
Ireland remains an attractive location for foreign direct investment (FDI), reflective of our continued reputation as a stable and pro-enterprise economy internationally. Latest data shows that the stock of FDI in Ireland stands at almost €1.4 trillion. Furthermore, the IDA reported the highest ever increase in FDI employment last year, while overall employment in the multinational sector in Ireland is estimated at over 300,000. Thus, it is clear that while the global economy is entering a slowdown, Ireland remains among the most attractive locations for global FDI.
Nevertheless, the outlook for the international economy is one of extreme uncertainty and there are significant risks to the economic outlook for Ireland, as well as for the wider European economy. I am conscious of the need to maintain our competitive position on an international stage. My Department will continue to closely monitor threats to Ireland’s competitiveness in the year ahead.
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