Peter Burke (Longford-Westmeath, Fine Gael)
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My Department continuously monitors trends in consumer and wholesale prices - whether domestic or international - and those developments which are generating high headline inflation.

Ireland is effectively a price taker on most international markets, and many of the drivers of Irish inflation are outside our control. As a small, open trading economy Ireland is exposed to global inflationary pressures, including fluctuations on international markets for energy, commodities and food. Our remote geographic location can also add to transport costs for goods, which along with our small market size, can add to costs for businesses.

As a result of these inflationary pressures, input costs rose for many Irish businesses, peaking in 2022 and early 2023. In large part, this was driven by high energy costs resulting from the war in Ukraine. However, inflation has moderated significantly over the last number of months.

The Consumer Price Index (CPI) rose by 2.9% between March 2023 and March 2024, down from an increase of 3.4% in the 12 months to February 2024, and well below the annual increase of 7% for March 2023. The ESRI forecast of inflation for 2024 and 2025 is 2.3% and 2% respectively. This moderation in inflation is being driven by a sharp decline in energy prices. The CPI for energy, gas and other fuels in March 2024 was 16.1% lower than in March 2023.

The Harmonised Index of Consumer Prices for Ireland (HICP, which tracks inflation across the EU using a harmonised approach) is estimated to have increased by 1.7% in the 12 months to March 2024. This compares to 2.4% in the Euro Area. The ECB’s target rate over the medium-term is 2%.

The Wholesale Price Index for February 2024 was 3.3% higher than in February 2023, however, there were some significant improvements relative to last year. Of note, wholesale electricity prices were 46.8% lower, while prices for food products were 9.3% lower. Wholesale prices for construction products were 0.7% lower.

Although the Government cannot fully insulate individuals and businesses from developments in international markets, we have been proactive in introducing measures to remedy the fallout from higher rates of inflation. Some of the measures included in Budget 2024 include:

• The 9% VAT reduction for gas and electricity was extended by an additional 12 months, until 31st October 2024;
• The temporary excise rate reductions applying to auto diesel, petrol and marked gas oil which were due to expire on 31 October 2023 were extended until 31 March 2024;
• An increase in VAT registration thresholds for SMEs to €40,000 for services and €80,000 for goods;
• The introduction of the Increased Cost of Business Scheme, which will provide a once-off grant to benefit up to 130,000 small and medium businesses at a cost of more than €250 million.