Dáil Éireann debate -
Wednesday, 19 Nov 1997

Vol. 483 No. 1

Written Answers. - Inflation Levels.

Gerry Reynolds

Question:

23 Mr. G. Reynolds asked the Minister for Finance if he will give details of the expected levels of inflation underlying the 1998 Estimates; and his views on reports by some commentators that there could be a significant increase in inflation during 1998. [19612/97]

Minister for Finance (Mr. McCreevy)

The 1998 Estimates are based on an expected inflation rate of about 2 per cent next year. The ESRI in their most recent forecasts also suggest that inflation could be 2 per cent in 1998.

Inflation in Ireland continues to be very moderate. In the first ten months of 1997 the average year-on-year increase in consumer prices was just 1.4 per cent and the average for the year as a whole is now expected to be about 1.5 per cent. This compares with an original forecast at the start of the year that inflation would be about 2.2 per cent.

While some commentators have expressed concerns that inflation will increase next year, there is evidence to suggest that a number of factors have played a substantial role in maintaining low inflation during 1997. These factors will continue to have an influence next year. Strong investment is increasing the Irish economy's capacity to sustain strong non-inflationary economic growth. Greater competition in all sectors of the economy will continue to subdue prices. Partnership 2000, for Inclusion, Employment and Competitiveness should restrain the potential for wage inflation in the non-traded sector. Externally, the international inflationary environment was subdued in 1997 and is expected to remain so in 1998. In addition it is possible that some Irish importers have switched to alternative cheaper sources for their products; this should have a mitigating effect on Irish inflation next year.