Varadkar says Ireland could avoid slipping into recession amid global uncertainty 

Tánaiste sounds a cautious note about energy prices, but suggests Irish economy could escape the worst of the global downturn

'We may even be able to balance the books this year,' said Leo Varadkar when quizzed by reporters as he officially opened the new red panda and snow leopard habitats at Dublin Zoo. Picture: Colin Keegan

The Government is confident that it can stave off a recession this year, Tánaiste Leo Varadkar has said.

Mr Varadkar has warned that the State will be put under extra financial pressure as a result of the spiralling cost of living and the Ukrainian humanitarian crisis.

However, he said the country can afford the €2.5bn that may be required to accommodate and support Ukrainians and pointed to the fact that Ireland was one of the few countries across the world that had avoided a recession during the pandemic.

“I think we can pay for it because we have a very strong economy,” he said.

“We are estimating that we may even be able to balance the books this year — that’s what the ESRI is saying, notwithstanding the headwinds that we’re facing.

We were one of the few countries in the world that avoided going into recession during the pandemic and it’s our objective to make sure that we’re one of the few countries in the world that will avoid going into recession because of what’s happening in relation to the energy and Ukraine crises. 

The Tánaiste pointed to the “pipeline of investment” and job creation which remains strong, though he cautioned that no one can guarantee what might happen in the coming months.

“I think it’s difficult and I can’t guarantee that it’s going to happen,” said Mr Varadkar. 

“We see evidence of the German economy slowing down very considerably at the moment, but they are much more exposed to the situation in Russia than we are. We see evidence of very high inflation in the US, much higher than here, and the classic bond curve inversion which has just occurred, which tends to presage a recession certainly in the US.

“But, as I say, we did manage to avoid going into recession during the pandemic. I am determined, as is Minister [Paschal] Donohoe and the Taoiseach, that we avoid going into recession as a consequence of the current crisis. That is possible. But it does mean doubling down on all the things that make Ireland successful economically.”

Concern about energy prices 

However,  Mr Varadkar did raise concerns around the supply of diesel in the coming months and said energy prices could double from their starting point. 

Asked if rationing of energy may be required given the most recent demands that Russian supplies be paid for in roubles, Mr Varadkar said: “There is concern around the supply of diesel potentially over the next couple of months, and then gas if the Russians were to cut off gas supplies to Europe, but we’re confident that with the contingency measures we put in place we won’t be in a position to have to ration any energy. But we will be encouraging conservation and we will make contingency plans in the unlikely event that that were to occur.”

Speaking at the opening of Dublin Zoo’s new red panda and snow leopard habitats, Mr Varadkar said the Government will do “whatever it can” to soften the blow of inflation to households, but he added: “We don’t want to get in a position whereby we’re borrowing money with the people’s credit cards only to take it back off them at a later date.”