IMF: Irish economy fastest growing in eurozone amid global inflation and war costs

Ireland’s GDP will grow 5.2% this year and by 5% in 2023, while inflation here will average 5.7% and 2.7% over the two years, the IMF forecasts.

The Irish economy looks set to be the fastest growing in the eurozone over the next two years, despite the huge inflation and war pressures wreaking havoc with the global recovery, according to new IMF forecasts.

In its World Economic Outlook, the IMF slashed its global forecasts for a rebound from the Covid-19 crisis but nonetheless projects that the largest economies will defy recession in the face of escalating price pressures.

GDP growth in the eurozone will slow sharply to 2.8% this year and 2.3% in 2023 — down from the 5.3% expansion posted last year.

Consumer price inflation will average 5.3% in the eurozone this year before slowing to 2.3% in 2023, according to the new forecasts.

In terms of economic growth, the Irish economy stands out, which may help soothe some concerns about the outlook for the Irish economy and for the foreign-owned multinationals based here to continue to export to world markets despite the global slowdown.

Ireland’s GDP will grow 5.2% this year and by 5% in 2023, while inflation here will average 5.7% and 2.7% over the two years, the IMF forecasts.

Managing Director of the IMF Kristalina Georgieva

The economies of the two major eurozone powers, Germany and France, will grow 2.1% and 2.9% respectively this year, according to the fund’s projects.

The IMF sees unemployment in Ireland at an average of 6% this year and 5.4% in 2023. That compares with the unemployment rates of 7.3% and 7.1% respectively that it forecasts for the whole of the eurozone in the next two years.

The fund warns that the hikes in global energy and food costs will broaden out and that inflation will stay higher for longer.

“Although bottlenecks are expected to eventually ease as production elsewhere responds to higher prices and new capacity becomes operational, supply shortages in some sectors are expected to last into 2023,” it said.

“As a result, inflation is now projected to remain elevated for much longer than in our previous forecast, in both advanced and emerging market and developing economies.”

The IMF forecast Ukraine’s economy will slump by 35% this year, and Russia’s output may shrink 8.5%.

It projects British economic growth will slow sharply to the weakest of any major economy next year. The IMF cut its forecast for British GDP this year to 3.7% from January’s forecast of 4.7%, while for 2023 the growth rate was almost halved to 1.2% from 2.3%.

“Consumption is projected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions are expected to cool investment,” the IMF said.

As well as being the weakest growth of any country in the G7 next year, the scale of the downgrade is also bigger than for any other G7 economy.

The IMF forecasts did not explain in detail why Britain, which has fairly limited direct trade links with Russia and Ukraine, would be so hard hit.

However, its forecasts showed inflation in Britain would stay elevated, dropping to 5.3% in 2023 from 7.4% this year.

Additional reporting Reuters