The Irish economy continues to demonstrate a significant degree of resilience with domestic economic activity expected to grow by 7.5 per cent this year, the Economic and Social Research Institute (ESRI) has said.
The think tank also said Ireland is unlikely to experience any major fall-off in corporation tax revenue as a result of changes to the way multinationals are taxed and may, contrary to predictions, benefit from the changes.
In its latest quarterly analysis, the ESRI predicts a surplus in the Government budget for this year and next as a result of the substantial recovery in the labour market and robust growth in taxation receipts.
However, it warned that inflation is expected to increase through the winter before moderating in 2023 due to the war in Ukraine and the resulting strain on the European energy market. The institute forecasts inflation to average 8.1 per cent in 2022 and 6.8 per cent in 2023.
The analysis said recession risks are now rising across Ireland’s main trading partners, with prospects for the UK economy of particular concern. It warned that it was very difficult to fully assess the contagion effects of a possible full-blown financial crisis in the UK.
Overall, the ESRI expects modified domestic demand to increase by just 2.5 per cent in 2023, a downward revision on previous estimates.
