Vol. 576 No. 6
154 Mr. Durkan asked the Minister for Finance the steps he proposes to take to ensure that Ireland's economic position within the European Union remains attractive; and if he will make a statement on the matter. [30449/03]
Our economic record far outshines that of our main European partners. Ireland's gross domestic product grew by an average of 9% between 1997 and 2002, compared to an average of about 2.5% in the Union as a whole. We expect that Ireland will outperform the EU average again in 2003. It is estimated that there will be GDP growth of 2.2%, compared with just 0.4% for the Union as a whole. Securing the competitiveness which has been so instrumental to our economic development, thereby safeguarding jobs, is a key priority for the Government. The recent strengthening of the euro and its negative impact on our competitiveness further emphasises the need to keep domestic costs down.
Competition for international projects across all sectors is increasing. In that regard, it is vital that our ability to compete on the international stage is maintained and enhanced. Irish tax policy must have regard to international developments. Any obstacles to our competitive position need to be identified and addressed. The capital gains tax exemption which I announced in budget 2004 will remove what international businesses regard as an incentive to locate their headquarters or holding companies elsewhere. Increased research and development activities can help embed existing firms activities in Ireland as well as develop additional high quality employment. The research and development tax credits, which I also introduced in budget 2004, can be an effective instrument for increasing research and development.
If we are to safeguard competitiveness, it is essential that we bring our inflation rate down to that prevailing in our major trading partners as soon as possible. The recent budget will help keep inflation low. The Government made a commitment in Sustaining Progress to working with the social partners to exert downward pressure on inflation. Inflation has fallen from 5.1% in January to 2.3% in October, its lowest level in four years. This is a very welcome development. If we continue to work together in partnership, I am confident that we will address the issue of domestic price pressures in the economy to bring inflation down even further. The implementation of the moderate pay arrangements set out under Sustaining Progress is vital in this context. Keeping public expenditure on target will be important if our inflation rate is to be moderate. I have put in place management and control mechanisms to this end.
