Finance | Meeting economic fundamentals after Budget 2023
To ask the Minister for Finance the extent to which the necessary economic fundamentals continue to be met and will do so in the coming year in the aftermath of Budget 2023 or otherwise; and if he will make a statement on the matter.
Over the course of the last year, the Irish economy has faced numerous economic headwinds, the most pressing of which relates to Russia’s invasion of Ukraine which drove a sharp rise in energy prices across the global economy with Europe at the epicentre of the energy price shock. Ireland has experienced broad-based and decades-high inflationary pressures as a result.
Inflation peaked at around 9½ per cent in Ireland last summer and averaged 8.1 per cent over the course of 2022. A positive recent development has been the recent easing in wholesale energy markets which suggests that inflation has now peaked and is on a downward trajectory. Nevertheless, price levels remain high and the annual rate of inflation is still substantially above the 2 per cent target that is consistent with price stability.
Government recognises the substantial difficulties facing Irish households and businesses as a result of these inflationary pressures, and has implemented a wide range of measures to support those most affected by increased prices. Budget 2023 was primarily focused on mitigating inflationary pressures in a targeted and temporary manner in order to support businesses and households without inadvertently exacerbating inflation. In total, the Government has provided around €12 billion in cost of living supports to date.
Despite the significant inflationary pressures facing the economy, Ireland’s economic fundamentals remain strong and this has been most clearly evident in the labour market. A record 2.6 million people were in employment in the fourth quarter of last year, while the unemployment rate stood at just 4.3 per cent in February.
Reflecting the continued strength of the labour market, personal consumption growth was robust in the final quarter of last year, increasing by just over 1 per cent compared with the previous quarter. Over the course of 2022 as a whole, the domestic economy grew steadily in spite of inflationary pressures, with modified domestic demand up by 8.2 per cent.
Since the start of the year, incoming data both internationally and domestically suggest that the expected economic slowdown this year may not be as severe as expected at Budget time. My department continues to monitor the relevant economic indicators and trends on an ongoing basis and will publish updated macroeconomic projections with the Stability Programme Update in April.
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