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Dáil Éireann debate -
Thursday, 30 Nov 2000

Vol. 527 No. 2

Ceisteanna – Questions. Priority Questions. - Economic Growth.

Bernard J. Durkan

Question:

11 Mr. Durkan asked the Minister for Finance the extent to which he anticipates continued economic growth over the next five years; and if he will make a statement on the matter. [27950/00]

The economy should continue to grow strongly over the next five years, albeit at a slower pace than in the recent past. The national development plan which the Government published last year was based on an annual average growth rate of 5% over the period 2000-06. This was based on an assessment of prospective trends in the labour force and gains in productivity and the following assumptions: the continuation of a favourable international environment; the maintenance of the economy's international competitiveness; and the implementation of the NDP to address our infrastructural problems.

In 2000 the economy grew more rapidly than expected. Labour market conditions continue to tighten while unemployment has fallen below 4%. The reduced pool of available labour, in conjunction with infrastructural constraints which cannot be resolved overnight, will slow economic growth. However, I am confident that with the correct policies we can continue to grow strongly over the medium-term. An updated assessment of economic prospects and projections over the period 2000-03 will be published by my Department on budget day.

Is the Minister as optimistic about further growth in the economy as he was this time last year? What documents will be published by his Department this weekend in advance of the budget?

The White Paper on Receipts and Expenditure will be published by my Department this Saturday morning, to conform with the terms of Article 28 of the Constitution. On budget day an economic review will be published as part of the budget documentation, together with an updated stability and growth programme, which used to be known as the Economic Outlook. It will be sent to the EU Commission.

The figures we projected last year for growth in the economy for 2000 were understated, in line with figures projected by other forecasters. In GDP terms the EU Commission is now forecasting growth of 10.5% for this year, 8.2% for 2001 and 7.3% for 2002. The OECD is forecasting growth of 11% for this year, 7.9% for 2001 and 7% for 2002, also in GDP terms. In the middle of the year my Department publishes its economic review and outlook. In the middle of this year we projected GDP growth of 10.3% for this year, or 8.3% in GNP terms. I will publish revised forecasts on budget day. My budget figures last year were more conservative than were the figures of most economic forecasters. We projected a slow-down in economic activity. For the past five years Ministers for Finance have been projecting a slow-down in activity but it has not occurred. We expect medium term growth to be approximately 5%. Given the high growth rate for this year it can be assumed that the rate for future years will be lower.

I appreciate that across Europe, GDP rather than GNP figures are used, but GNP figures are a better measure to use in Ireland. Does the Minister have the equivalent GNP forecasts?

I do not have them in respect of the forecasts made by the EU Commission. Our figure published in July forecast GDP growth of 10.3%, the EU Commission forecast 10.5% and the OECD forecast 11%. Our GNP growth projection was 8.3%. That would indicate GNP forecasts from the EU Commission and the OECD of 8.5% to 8.6%.

When does the Minister expect growth to moderate?

We have been forecasting a slow-down, which has not materialised. Nevertheless, given the labour market tightening growth will slow.

Does the Minster agree that a slow-down in the economy at this stage might not be a bad thing because of the inflationary pressures building within the economy, such as labour shortages? If he accepts that proposition does he intend to take any active measures to produce an orderly slow-down in growth?

I would like to think that my three and a half years as Minister with responsibility for the conduct of economic affairs has been effective in keeping economic growth at high levels. With the tightening of the labour market, the unemployment rate at less than 4% and with other constraints in the economy, growth will slow. These developments are automatic in a small open economy like Ireland's. Attempts to deliberately slow it down are not on my agenda. It is happening, but it is important for growth in future years that we alleviate capacity constraints, referred to by Deputy Noonan and his party. If we are not in a position to solve some of our infrastructural problems in the immediate future we will have a slow-down. I have no difficulty admitting there are problems that need to be addressed.

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