Ireland hit harder by electricity price hikes than most

High electricity prices have been driving inflation in Ireland, whereas energy costs are falling in our eurozone neighbours.

Research by economist Simon Barry also shows that food price hikes have been running well below the eurozone average rate since 2020.

“Overall, the current episode of price pressures is undoubtedly very unwelcome for Irish households,” said Mr Barry, who is an independent economist.

“Irish consumers have faced a double-whammy negative effect when it comes to the prices they have been paying for electricity, both in absolute terms and relative to the eurozone: they faced much steeper price increases on the way up, and – in contrast to the aggregate eurozone – they have not benefited, yet at least, from any meaningful price reductions.”

Consumer prices for electricity in Ireland are now more than double where they were three years ago – when prices started to rise across the EU – rising at double the rate in the rest of the eurozone.

It was the third-highest increase in the eurozone after Estonia and Italy.

If Irish electricity prices had reduced in line with the rest of the eurozone, they would be 40pc below where they are now.

In June, electricity prices were up 35pc compared to June last year, while they rose just 1.4pc across the eurozone as a whole.

Meanwhile, consumers in Ireland have experienced less than 70pc of the food price hikes faced by our eurozone neighbours since 2020.

Consumer prices for food and non-alcoholic beverages in Ireland in June were 18.3pc higher than they were in December 2020, the month that eurozone prices started rising.

Prices across the eurozone are up 26.4pc in the same period.

Prices for restaurants and hotels, recreation and cultural activities and communications were also rising faster here than in the rest of the eurozone in June.

“There are welcome signs that overall inflationary pressures have become less intense in recent months, while it is also welcome that Inflation pressures in Ireland are somewhat lower than the eurozone average,” Mr Barry said.

A new forecast from consultants EY forecast that inflation had already peaked, and is set to come in at 5.8pc for 2023. However, it will not fall below the European Central Bank’s 2pc target until 2025.

The forecast predicts the Irish economy – measured in terms of gross domestic product – will expand by 4.8pc in 2023 and 4.3pc in 2024.

The domestic economy is expected to grow more slowly, by 3.4pc in 2023 and 3pc in 2024