Bernard Durkan (Kildare North, Fine Gael)
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261. To ask the Minister for Finance the extent to which he remains satisfied that this economy continues to perform well when considered in the overall European context; and if he will make a statement on the matter. [3323/23]

Bernard Durkan (Kildare North, Fine Gael)
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262. To ask the Minister for Finance the extent to which he remains satisfied with the performance of Ireland’s economy when compared will all others in the eurozone; and if he will make a statement on the matter. [3324/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 261 and 262 together.

The invasion of Ukraine and Russia’s weaponisation of gas supplies has triggered an exceptionally large energy price shock and undermined global economic prospects. Given its reliance on Russia for gas imports, the European economy is facing a significant terms of trade shock, manifesting in multi-decade high inflation rates. As such, many of the headwinds faced by the wider European economy are the same as those faced by Ireland.

Inflationary pressures rose sharply over the course of last year, with an average annual rate of inflation of 8.1 per cent recorded in Ireland for 2022 as a whole. While it appears as though inflation has reached its peak, it is expected to remain elevated over the coming months.

Against this backdrop, growth in the domestic economy is expected to remain subdued as inflationary pressures continue to erode household incomes and weigh on consumer spending. However, the Irish economy is facing into this crisis from a relatively strong position with record employment levels and an unemployment rate standing at just 4.3 per cent in December – close to the lowest on record.

My Department is forecasting modified domestic demand (MDD) growth of 1¼ per cent for this year, and while low in comparison to non-Covid years, it compares relatively favourably to our European peers. The OECD forecasts growth of just ½ per cent for the Euro area for 2023, with a projected contraction in the UK economy of -0.4 per cent. The German economy is expected to contract by -0.3 per cent, while the French economy is forecast to grow by 0.6 per cent.

My Department will update its macroeconomic forecasts as part of the Stability Programme Update in the spring.