The European Union narrowly avoided a winter recession thanks partly to the strength of Irish economic growth, and is set for lower inflation and stronger growth than expected in 2023, new figures show.
“Overall these forecasts point to a euro area that has maintained its resilience despite the incredible economic shocks of recent years,” Minister for Finance and Eurogroup president Paschal Donohoe said as he arrived at a meeting of EU finance ministers.
“We are seeing economic growth go up a bit, we’re seeing inflation come down a bit, but it’s still a high level,” Mr Donohoe said. “Employment in the euro area has been incredibly resilient in the face of the economic consequences of the war.”
The finance ministers are set to discuss the new 2023 forecasts, which show the Irish economy to be the fastest growing in the EU again at 4.9 per cent in 2023, while overall EU GDP is expected to grow 0.8 per cent.
Inflation peaked at an all-time high in October, but has now decreased to 8.5 per cent in the euro area, according to a flash January estimate.
Ireland’s estimated economic growth of 12.2 per cent in 2022, which continued at a stronger rate than any other EU country throughout the winter, helped the union narrowly avoid a technical recession – defined as two consecutive quarters of negative economic growth.
Real economic growth in Ireland was “much stronger than anticipated” in the third quarter of 2022, and sentiment indicators now suggest an improving outlook.
In Ireland “exports of both goods and services kept on expanding robustly, and private consumption grew despite downbeat consumer sentiment”, the European Commission’s Winter Economic Forecast for 2023 read. There was “yet no visible negative impact in Ireland” of announcements by big tech companies that they would reduce employment worldwide, and overall hiring by multinationals in Ireland increase 9 per cent in 2022.
EU economic chief Paolo Gentiloni said that the resilience of households and companies in the union had been “impressive”, and that the overall European economy was entering 2023 on a healthier footing than expected. A global slowdown looked set to be short-lived. There remained uncertainty surrounding the economic outlook due to the war in Ukraine, but these risks were no longer “tilted to the downside” as they were in autumn.
“Domestic demand could turn out higher than projected if the recent declines in wholesale gas prices pass through to consumer prices more strongly and consumption proves more resilient,” he said. “Nonetheless, a potential reversal of those declines cannot be ruled out in the context of the ongoing war and broader geopolitical tensions.”