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Ireland’s finance minister has warned of continued headwinds facing the economy as it was confirmed the nation entered a technical recession earlier this year.
Gross domestic product fell by 2.8% in the first quarter of 2023, the Central Statistics Office confirmed on Friday.
The CSO has also revised the growth rate for the final quarter of 2022 to just below zero, recording a contraction in GDP of just shy of 0.1%.
This means Ireland experienced two quarters in a row with falling GDP the technical definition of a recession.
The figures were contained in the CSO’s publication of the national accounts for 2022 and the first quarter of 2023.
Overall across 2022, GDP grew by 9.4%, driven by expansion in multinational-dominated sectors.
Finance Minister Michael McGrath welcomed what he described as strong growth.
However, he cautioned that the contraction at the start of the year reflected the volatile nature of production in multinational sectors.
‘I welcome today’s data which confirm the strong post-pandemic rebound in the domestic economy last year,’ said McGrath.
‘Despite multi-decade high rates of inflation, it is encouraging to see the very strong growth in both consumer and investment spending.’
McGrath said investment spending in Ireland was particularly strong in 2022, both domestic and multinational.
‘Reflecting the delivery of nearly 30,000 houses last year, dwellings investment was up almost 40%,’ he added.
‘I am also encouraged to see the strong and sustained investment by multinationals in the Irish economy, with machinery and equipment investment increasing by over 50% last year, a massive vote of confidence in the Irish economy by the multinational sector despite the many challenges facing the global economy.
‘This investment will boost the productive capacity of the multinational sector in Ireland and will bring with it employment and exports in the years ahead.
‘Looking ahead, the strength of our labour market, rising consumer confidence and the easing in inflation should all support growth over the remainder of the year.
‘That being said, many of the headwinds to growth which existed at the start of the year remain ever-present.
‘Our economy is still facing significant capacity constraints, particularly in our housing and labour markets, which are keeping non-energy inflation much higher than expected.
‘Rising interest rates have also placed a greater financial burden on businesses and households. Growth has also slowed in many of our key export markets, weighing on demand for Irish exports as a result.’
McGrath said those conditions framed the backdrop for the recently published Summer Economic Statement, which frames the taxation and spending parameters for the autumn budget.
‘This strategy will allow us to, once again, strike the right balance in ensuring sustained investment in our public services and infrastructure while keeping our public finances on a positive trajectory; the strategy will also avoid a situation in which budgetary policy becomes part of the inflation problem,’ he said.
source: PA
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