Bernard J. Durkan
Question:400 Mr. Durkan asked the Minister for Finance if he has identified the sources of the lack of competitiveness in the Irish economy; and if he will make a statement on the matter. [21271/03]
Written Answers. - Economic Competitiveness.
The report of the National Competitiveness Council published last November identified the key competitiveness issues for the Irish economy. The most significant issues listed by the council include rising costs, adverse exchange rate developments and inadequate infrastructure, including telecommunications and energy. While wage growth is slowing in response to economic conditions, it is still in excess of that of our main trading partners. Improvements in infrastructure have not kept pace with rapid economic growth.
As we are all aware, losses of competitiveness lead to lower economic growth and the risk of higher unemployment. It is important that wages growth be sufficiently flexible to adjust to the changed economic environment and be closely aligned to productivity growth, particularly in the public sector.
Competitiveness is fundamental to our future prosperity. In the medium term, the emphasis must be on the elimination of excessive wage growth, the provision of low inflation, productivity gains, and a competitive business environment.
Given that Ireland is one of the most open economies in the world, it is important that steps are taken to position the economy to maximise the benefits and growth potential from any upturn in the global economy.
Bernard J. Durkan
Question:401 Mr. Durkan asked the Minister for Finance if he expects the economy to improve in terms of competitiveness; and if he will make a statement on the matter. [21272/03]
As a small open economy our prosperity is, to a large degree, determined by our ability to supply goods and services to the global economy. In this regard, it is essential that we regain some of the lost ground in relation to competitiveness in order to protect existing jobs and attract new ones.
Relatively high wage growth in Ireland along with the appreciation of the euro against sterling and the dollar, has implications for Irish competitiveness. The rapid appreciation of the euro exchange rate in 2003 is likely to impact on the profit margins of many firms. Particularly exposed are those firms in the more traditional sectors of the economy, which are relatively labour intensive.
The Irish economy has the capacity to grow at up to 5% per annum over the medium term. Achieving growth rates of this magnitude, however, is conditional upon, inter alia, improvements in competitiveness. It is important that expectations in relation to wages, prices and public spending measures adapt to the newer environment of increasing international competition, weaker global demand and lower economic growth. It is also important that wages developments closely reflect productivity growth, particularly in the public sector.
Bernard J. Durkan
Question:402 Mr. Durkan asked the Minister for Finance if he intends to make any budgetary changes to address the most urgent economic issues facing the economy at present; and if he will make a statement on the matter. [21273/03]
I will present budget 2004 to the Dáil on 3 December 2003 and I will set out the changes which I intend to make at that time. As is normal, I will not be commenting on the contents of budget 2004 in advance of that date.