EU Commission: Ireland's rebound to be strongest in Europe from Covid crisis this year

The forecasts repeat many of the themes highlighted by Irish private forecasters but are if anything more conservative than many other projections. Picture: Hannelore Foerster/Bloomberg via Getty Images 

Ireland’s economic rebound from the Covid economic crisis will be the strongest in Europe as pent-up domestic spending fuels recovery, according to new EU forecasts.

In its summer forecasts, the Commission sees Ireland's GDP surging by 7.2% this year, much higher than the eurozone average of 4.8% and continuing to grow in 2022, by just over 5%.

The forecasts repeat many of the themes highlighted by Irish private forecasters but are if anything more conservative than many other projections.

The Economic and Social Research Institute last month projected GDP would surge by over 10% this year, helped by exports and domestic spending. 

The new forecasts come as the Government prepares to release its new forecasts.

In its assessment, the Commission said multinationals will tap the upswing following the ending of the Covid closedowns across the world, while “domestic sectors are expected to perform even better in the second half of the year” while household savings will continue to lend support next year too, the Commission said.

It projects Irish price inflation under the EU harmonised measure will rise 1.5% this year and ease back to 1.2% in 2022.

The Commission reiterated that plans to overhaul the way multinationals are taxed around the world, as well as the implementation of the Irish Sea border Brexit protocol, remain downside risks.

But it added “that on the upside, the performance of multinational corporations could again exceed expectations".

New CSO figures showed a mixed picture for factory output. 

The so-called modern sector dominated by multinationals contracted by 4.3% between March and the end of May from the previous three months but has climbed 15.6% from the same period a year ago.

Output of the traditional sector grew 2% in the three months and have surged 26.5% from a year earlier.

Meanwhile, German finance minister Olaf Scholz said he does not expect hurdles to moving ahead with a planned global tax reform at a G20 meeting in Venice this weekend.

"Everything will happen very quickly now," Mr Scholz said. 

"The goal is very ambitious: we want to have everything ready already so that it becomes international practice in 2023," he added.