Dáil Éireann Debate, Thursday - 15 November 2012
32. Deputy John McGuinness asked the Minister for Finance if he concurs with the assessment of the European Commission in respect of growth prospects for 2013; the impact this potentially has on the public finances; and if he will make a statement on the matter. [50497/12]
View answerThe European Commission published its forecasts in early November and forecast real GDP growth of 1.1% in 2013. This is slightly lower than my Department’s most recent forecast, published yesterday in the Medium Term Fiscal Statement (MTFS), which projected real GDP growth of 1.5% for the year as a whole. I would point out however that some domestic commentators have recently suggested growth of 2.1% next year. The consensus forecast, the median of the private sector forecasts, at the end of October was 1.5%. The achievement of fiscal targets is driven by a range of factors, including overall economic performance as well as specific developments which effect revenue and expenditure patterns in a given year.
Broadly speaking, nominal GDP developments drive revenue growth, and nominal GDP growth has been slightly above expectations this year. These developments in nominal GDP are one of the reasons why, notwithstanding lower real growth forecasts, the Commission is still projecting a similar deficit to my Department for next year.
Under the revised Excessive Deficit Procedure (EDP) Recommendation issued by the ECOFIN Council in December 2010, the State’s General Government deficit must not exceed 7.5% of GDP in 2013. On the basis of the most up-to-date economic and fiscal data available, the deficit limit is viewed as being achievable on the basis of the implementation of the €3.5 billion consolidation package in 2013, as outlined in the MTFS.
Ireland is committed to implementing further consolidation in the coming years in order to correct our excessive deficit, put debt on a downward trajectory and sustain investor confidence. This should assist in keeping the cost of borrowing as low as possible so as to minimise the cost to the taxpayer of debt interest payments. Indications of the success of this approach are already evident in the form of the lowering of bond yields since early summer and the NTMA’s continuing access to the debt markets.
