Trevor Sargent
Question:63 Mr. Sargent asked the Minister for Finance his views on the OECD's preliminary economic review published on 21 November 2001; and if he will make a statement on the matter. [29772/01]
Written Answers. - OECD Report.
The OECD Economic Outlook No. 70 published on 21 November gives the OECD's views on the economic performance of the OECD area in general and of each member country.
According to the outlook, output growth in real terms in the OECD area is expected to be 1% this year. Growth may pick up in the course of 2002 and may exceed 3% in 2003. This projection assumes a politically benign environment. World trade is expected to rebound strongly in the latter part of 2002, consistent with a recovery of spending on ICT goods and a strengthening pull from US imports from mid-2002 onwards.
The section on the Irish economy included in the outlook projects real growth of 5.6% this year, slowing to 3.7% in 2002 before recovering to 6.4% in 2003. Exports and associated imports are likely to remain weak until well into 2002 when a pick-up in the world economy is projected. It also suggests that unemployment may reach 5.3% in 2002, but that wage growth and inflation should slow.
The OECD identify a number of risks to its projections. A key risk is that wages will continue to grow rapidly. If, in addition, the euro were to appreciate, competitiveness might deteriorate significantly, which would reduce the impact of the global pick-up going into 2003 and, with the economy slowing, house prices could weaken, leading to reduced consumption and less buoyant household sentiment. The OECD advises that policy needs to focus on improving human capital and infrastructure but that moderate pay increases in the private sector will also be required to maintain competitiveness. It also advises that rising current expenditures need to be carefully monitored to ensure objectives are being achieved efficiently.
I agree with the OECD's overall analysis of the state of the Irish economy and with its advice regarding future policy requirements. The improvement of human capital and the provision of infrastructure are key priorities of Government policy. I also agree with the OECD's view regarding the need for these policies to be supported by moderate pay increases to maintain competitiveness.
It should be noted that while the OECD forecast slower economic growth next year for Ireland than what we have achieved in recent times, it still sees Ireland growing more rapidly than virtually all other OECD member states through 2002. It foresees a renewal of strong economic growth into 2003 as the world economy picks up. It also confirms the view that Irish inflation should continue to ease over the period ahead.
I will publish our own estimate for growth on budget day.