{"id":25869,"date":"2022-04-13T13:18:00","date_gmt":"2022-04-13T17:18:00","guid":{"rendered":"http:\/\/irishexaminerusa.com\/wp\/?p=25869"},"modified":"2022-04-15T11:21:10","modified_gmt":"2022-04-15T15:21:10","slug":"irish-inflation-to-peak-at-6-75-per-cent-this-year","status":"publish","type":"post","link":"https:\/\/irishexaminerusa.com\/wp\/?p=25869","title":{"rendered":"Irish Inflation To Peak At 6.75 Per Cent This Year"},"content":{"rendered":"\n
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The Minister for Finance Paschal Donohoe said that inflation is expected to average out at 6% for the year, peaking at 6.75% in the second quarter (PA)<\/em><\/figcaption><\/figure>\n\n\n\n

The Government has forecasted inflation to peak at 6.75 per cent, however ministers have warned that pressure on oil and gas could push it up to 9 per cent.<\/p>\n\n\n\n

The Minister for Finance Paschal Donohoe said that inflation is expected to average out at 6 per cent for the year, peaking at 6.7 per cent in the second quarter.<\/p>\n\n\n\n

He said that elevated levels of energy and commodity prices are expected to feed through to higher levels of inflation.<\/p>\n\n\n\n

However, Mr Donohoe warned that if energy prices increase at unexpected rates, inflation could peak at 9 per cent.<\/p>\n\n\n\n

Mr Donohoe said that the growth of the domestic economy has been revised down compared to forecasts prepared for Budget 2022, and is now projected to grow by 4.25 per cent this year and just under 4 per cent next year.<\/p>\n\n\n\n

He said the economic fallout from the conflict in Ukraine is expected to slow, rather than derail the economic recovery.<\/p>\n\n\n\n

The annual average unemployment rate is also expected to fall to 6.25 per cent for the year as a whole, closing the year at just over 5.5 per cent.<\/p>\n\n\n\n

Publishing the government\u2019s Stability Program Update for 2022, Mr Donohoe said the government has recorded a deficit of more than \u20ac8 billion last year, with a further deficit of \u20ac2 billion projected for this year.<\/p>\n\n\n\n

While next year, a modest surplus is projected, reflecting the unwinding of Covid-related expenditure.<\/p>\n\n\n\n

\u201cThese economic and fiscal projections come at a time when the Irish economy is grappling with its third severe economic shock in as many years \u2013 Brexit, a global pandemic and now the fall-out from the war in Ukraine,\u201d Mr Donohoe said.<\/p>\n\n\n\n

\u201cWhile Ireland\u2019s direct exposure to the Russian economy is relatively small, it is clear that the conflict in Ukraine is already having a negative impact on the Irish economy, mainly via higher energy and commodity prices.<\/p>\n\n\n\n

\u201cOn foot of these developments, my Department now expects inflation to peak at 6.75 per cent in the second quarter of this year before easing slightly over the rest of the year.<\/p>\n\n\n\n

\u201cHigher inflation will inevitably impact on the purchasing power of households.<\/p>\n\n\n\n

\u201cUncertainty will also affect consumer spending and investment decisions.<\/p>\n\n\n\n

\u201cAs a result, my Department is now projecting Modified Domestic Demand growth this year of 4\u00bc per cent \u2013 a 2\u00bc percentage point reduction relative to the Budget. Despite this, the headwinds we face today are expected to delay \u2013 but not derail \u2013 economic growth.<\/p>\n\n\n\n

\u201cGiven the degree of uncertainty at present, the margin of error around these projections is sizeable.<\/p>\n\n\n\n

\u201cAs such, we also set out an alternative severe scenario, where the increase in oil and gas prices is larger than assumed; under this scenario inflation would increase by an additional 2 percentage points to an annual average of 8.25 per cent, peaking at 9.25 per cent in the third quarter of this year.<\/p>\n\n\n\n

\u201cThis would in turn have negative implications for the domestic economy and the government finances.<\/p>\n\n\n\n

\u201cWe are projecting a budget deficit of \u20ac2 billion for this year.<\/p>\n\n\n\n

\u201cThis would result in a cumulative deficit of almost \u20ac30 billion since 2020.<\/p>\n\n\n\n

\u201cFor next year, after allowing for a contingency fund of \u20ac3 billion to help address the humanitarian consequences of the Ukraine conflict, we are expecting a small surplus of \u20ac1.2 billion.<\/p>\n\n\n\n

\u201cHowever, the modest surplus currently in prospect for next year would be eliminated if there was a greater than expected increase in energy prices.\u201d<\/p>\n\n\n\n

Minister for Public Expenditure Michael McGrath said: \u201cSince the onset of the pandemic, Government has made available \u20ac37 billion to provide for direct expenditure measures to support our key public services in responding to the challenges of Covid-19 and to provide the necessary income and employment supports to our people and businesses.<\/p>\n\n\n\n

\u201cAs we emerge from the pandemic, our economy and labor market are recovering with unemployment rate forecast to fall close to 5.5% by the end of the year.<\/p>\n\n\n\n

\u201cHowever, as the economy improves and we return our public finances to a sustainable path, we now face new challenges.<\/p>\n\n\n\n

\u201cSupply issues which developed over the past two years during the pandemic have contributed to price increases.<\/p>\n\n\n\n

\u201cThis has been added to by the impact of the conflict in Ukraine and the resultant commodity price increases.\u201d<\/p>\n

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