THE IRISH ECONOMY is set to have grown by 13.6% by the end of the year, with unemployment rates falling to 7% despite the ongoing Covid-19 pandemic.
A new report from the Economic and Social Research Institute (ESRI) says that Ireland’s Gross Domestic Product (GDP) is set to increase by 13.6%, largely as a result of both multinational activities and strong export figures.
Unemployment figures have also stabilised in the last year, with unemployment dropping from 26% in the first quarter of 2021, to 7% in the last quarter of 2021.
The ESRI is forecasting that this decline will continue into 2022, and that unemployment will reach a pre-pandemic low of 5% by the final quarter of 2022.
Ireland’s domestic economy, measured in modified domestic demand (MDD), is set to grow by 6.2% by the end of the year.
Report author Conor O’Toole says that the MDD growth is due to increased spending from Irish households in recent months.
“The reopening of the economy through 2021 has led to a sharp rebound in the domestic economy, as households have increased spending,” said O’Toole.
Into 2022, the ESRI expects that both MDD and GDP will continue to grow. The institute have forecasted that both will grow by 7%.
However, the institute has said that a return to stringent public health restrictions remains a risk for 2022, particularly due to the increasing prevalence of the Omicron variant in Ireland.
“The increase in COVID-19 infections during Q4 2021 along with the emergence of the Omicron strain does give rise to the possibility of additional public health restrictions in early 2022,” reads the report.
“At the very least this creates considerable uncertainty for those operating in the sectors of the economy most affected.”
The ESRI has also raised concerns around the continued uncertainty of the Northern Ireland Protocol, and the ongoing negotiations between the UK and the EU. The institute says that significant disruption to EU and UK trade would have “particularly adverse” effects on the Irish economy.
“While the outlook remains positive in 2022 significant challenges may arise due to the ongoing presence of Covid-19, inflation and uncertainty around EU-UK trade relations,” said O’Toole.
Currently, the ESRI is forecasting that price increases due to inflation are likely to be higher than expected next year. A 4% inflation rate is expected for 2022, with this expected to fall to 2% by the end of next year.
EU Recovery
Finance Minister and President of the Eurogroup, Paschal Donohoe, has said that EU economic recovery is going well, with Euro area GDP returning to pre-pandemic levels after eight quarters.
Today I will attend the #EuroSummit with all EU leaders & ECB President @Lagarde. We will discuss the economic situation.
— Paschal Donohoe (@Paschald) December 16, 2021
Euro Area GDP is back to pre-COVID levels after 8 quarters. This recovery is 4 times faster than the financial crisis'. pic.twitter.com/GaDOpthSrz
Donohoe added that pre-pandemic employment levels are being restored far quicker than during the financial crisis, saying that this will “minimise risks related to long-term economic scarring”.
However, Donohoe said: “There is no room for complacency. The risks posed by the virus, potential further supply chain disruptions and inflation will need close attention.”
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