Bernard Durkan
Question:228. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy continues to be based on sound economic principles; and if he will make a statement on the matter. [21777/23]
View answerTuesday, 9 May 2023
Questions (228, 231)
Bernard Durkan
Question:231. Deputy Bernard J. Durkan asked the Minister for Finance his intentions to continue to ensure best practice economic performance in the future, keeping in mind the need to protect the stability of the economy and having regard to experiences in the past; and if he will make a statement on the matter. [21781/23]
View answerWritten answers
I propose to take Questions Nos. 228 and 231 together.
Over the course of the last year, Ireland has faced numerous headwinds. First, Russia’s invasion of Ukraine induced a crisis in global energy markets which sparked decades-high levels of consumer price (HICP) inflation. Secondly, inflation became an increasingly broad-based phenomenon, with spill overs from energy prices to many other sectors. Finally, the ECB has embarked on a front-loaded process of monetary policy normalisation, with 7 successive interest rate hikes culminating in a total increase of 3.75 percentage points in the main policy rate since last July.
Despite these numerous economic headwinds, Ireland’s economic fundamentals remain strong and the economy continues to be based on sound economic principles. The underlying strength of the Irish economy is most 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 3.9 per cent in April.
Helped by a buoyant labour market and strong household balance sheets, personal consumption growth was robust in the final quarter of last year despite inflationary headwinds. My Department expects the robust performance of the Irish economy to continue into the future, but is nevertheless acutely aware of the risks to the outlook.
Incoming data suggests that inflation has now passed its peak and is on a downward trajectory. In the recent Stability Programme Update, average annual inflation was forecast at 4.9 per cent and 2.5 per cent for this year and next year, respectively. The anticipated easing of inflationary pressures is expected to pass through to an improved outlook for the domestic economy, with MDD growth of 2.1 per cent projected for this year, a significant upward revision from the Budget 2023 forecast last autumn.
Despite this improved economic outlook, I am acutely aware that the outlook for the Irish economy remains highly uncertain. My Department continues to closely monitor macroeconomic developments both domestically and abroad.