The minister made the remarks while unveiling the government's budget plan for 2022 at the lower house of the Irish parliament.
He said that the domestic economy has recovered strongly as a result of the success of the vaccination program and the easing of the COVID-19 restrictions.
Modified domestic demand, the best measure of the domestic economy, grew by almost 8.5 percent in the second quarter of this year, he said, adding that at the end of the second quarter, consumer spending in the country was just 3 percent below the pre-pandemic levels.
The strong rebound in domestic economic activity has been accompanied by rising inflationary pressures, with the consumer price index expected to reach 3.7 percent in September, the highest rate since June 2008, he said.
Noting that the recent rise in inflation is partly a result of temporary factors, which are expected to fade over time, Donohoe warned that acute supply chain pressures, shortages of raw materials, labor shortages in certain sectors, as well as rising energy prices could pose further risks to inflation and the cost of living.
The positive momentum in the economy is also reflected in strong tax receipts throughout the year, said the minister, adding that the job market outlook in the country has also improved significantly.
He said that the current COVID-19 adjusted unemployment rate in Ireland has fallen below 10 percent, the lowest since the onset of the pandemic.
He predicted that the unemployment rate in the country will fall to around 6.5 percent by the fourth quarter of 2022 from around 9 percent in 2021 while the employment rate is expected to grow by 13 percent in 2022 on top of an 8-percent growth in 2021.
"We are recovering. The resilience of the Irish people, sensible fiscal policies before the pandemic and our economic supports during the crisis are the ingredients in the recovery," he said.
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