Finance Minister Paschal Donohoe has given his first grim and frank admission that recession is on the cards because of the war in Ukraine and the worsening cost of living crisis.
He said: “’We’ve acknowledged that recession is a risk.”
Mr Donohoe was speaking to reporters on Friday morning ahead of giving a briefing on the cost of living situation to the 27 leaders of the EU at the European Council meeting.
Mr Donohoe was speaking in his role as president of the Eurogroup of finance ministers.
The Taoiseach Micheál Martin also spoke to reporters on his way into the same meeting.
Mr Martin said that the risk of recession had arrived in Europe.
The Taoiseach was asked if he, like his finance minister, would acknowledge that Ireland is facing a risk of recession this coming winter.
He replied: “No, I’m not acknowledging that yet, there’s a risk of recession globally and across Europe, but we can’t take that as a given.
“That’s why this particular period has to be navigated very carefully.”
Mr Donohoe was more frank in his assessment.
He said: “We’ve acknowledged that recession is a risk in all of the economic forecasts that have been brought forward over the last number of months.
“But what we are seeing happen at the moment is lower growth, rather than recession materialise.
“And this is why I go back to the balance that finance ministers are trying to attain, putting in place measures that do support growth, that do protect employment, but at the same time acknowledging that measures are now happening to reduce inflation and then ensure that it does not become part of our economy in the years ahead.”
The Taoiseach added: “Our FDI side is strong, our industrial side generally, both indigenous and FDI is strong.
“But if global markets start weakening, then that could potentially in 2023 affect our export performance.
“There’s no immediate sign of that yet and you know, if you watch over the last couple of weeks, companies are investing in Ireland, companies are continuing to invest in Ireland.
“The census figures reveal that people are coming to work in Ireland in ever greater numbers over the past number of years, even through the pandemic, which all reflects a growing economy.
“But we have to try and get the balance right, we don’t want to end up in a stagflation situation.
“That’s something we must try and avoid at all costs.”