Pat Rabbitte
Question:22 Mr. Rabbitte asked the Minister for Finance his Department's estimate of the expected level of economic growth for 1991.
Ceisteanna — Questions. Oral Answers. - Economic Growth for 1991.
On budget day, I announced my projection for real GNP growth of around 2¼ per cent in 1991. Details of this together with an assessment of the outlook for the year were published in, "Economic Background to the Budget, 1991".
Is the Minister persisting with his prediction, having regard to the fact that virtually all independent forecasters predict a figure of about half of that, or 1½ per cent? Specifically, is the Minister persisting with his prediction in the light of last night's trade figures which showed a reduction in our trade figures of exports over imports of the order of £450 million against a budget forecast of an increase of 5½ per cent?
I want to inform the Deputy, and the House, that I stick with my projections at this stage. I made it clear that GNP growth in 1991 is expected to slow to 2¼ per cent compared with the 1990 growth of 5 per cent. The slow down derives primarily from international developments which are adversely affecting our main export markets. Apart from the Gulf conflict, the anticipated slow down in the UK and the US was likely to lead to substantially reduced growth overseas. The Gulf conflict, and the attendant uncertainty, worsens the outlook further, at least in the short term. Substantially lower growth will obviously have implications for employment and income growth and consequent knockon effects in the domestic economy. We have taken these into account in framing the budget. I would also like to emphasise that the need to maintain competitiveness is the single most important aspect of economic policy that we should be pursuing because even in depressed markets it does not follow that any particular exporter has to lose his share of the market, he can hold his share and increase it if he is competitive enough.
In response to Deputy Rabbitte I would like to say that in looking at the list of independent commentators, it is not true, as he has said, that we are the only one out of line. It is a new development to be accused of being on the optimistic side. I would refer the Deputy to the forecasts of the EC, the ESRI which came out on the same day as the budget, and of the Central Bank which came out in November. We have taken into consideration all the developments up to that. Finally, our budget started off on the basis of the EC projections in relation to world trade and the price of a barrel of oil at $29 a barrel. We subsequently reduced that figure to $25 a barrel but I would remind the Deputy and the House that today's price is less than $18 for a barrel of North Sea Brent oil and, from the Gulf area — I would imagine it is difficult enough to get oil out of there — it is about $12 a barrel. They are the basic calculations involved in the budget. We are taking the middle of the road, and not the top or the bottom projections.
Perhaps a final question, Deputy Rabbitte, with a view to disposing of the remaining Priority Question.
I note that the Minister did not reply to the one aspect that is not a forecast, last night's trade figures. How can he persist in his prediction against those figures?
We took them into account.
May I ask the Minister about a different dimension that affects the growth rate, the rate of net factor outflows which were in excess of £2 billion last year? Does the Minister intend to take any measures to cause at least some of those funds to be retained in the domestic economy?
What the Deputy says in relation to outflows is certainly true as a component of making up the GNP. However, I suggest to the Deputy that the GDP is more relevant in this situation in that the GDP reflects what is happening in the real economy here. If one looks at what the economic commentators are saying about GDP, one will see that their projections are very close to what we are saying, some are slightly above and some are slightly below. We are taking a middle of the road course and that is what affects the real economy.
Profit repatriation or capital outflows, or as the Deputy calls them, factor outflows, are a factor of GNP but do not really impact on what happens within the real economy, which is GDP. Nobody is too far off our figure. Many are around 2 per cent, 2.25 per cent, with maybe one forecasts or two below it. As I said, we got our figures right for the past four years and why should the people not have confidence in us to get them right for a fifth time? We are going to do what Kerry could not do, that is win five in a row.
The remaining question must be taken now if it is to be disposed of.
We did not win five in a row.
We are going to do what Kerry could not do, we are going to win five in a row.
A Deputy
You are hopping the ball now, Minister.