Dáil Éireann Debate, Thursday - 15 November 2012
98. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department has isolated the main issues affecting economic growth; the extent if any to which these matters can be addressed in the short term; and if he will make a statement on the matter. [50800/12]
View answerIreland is continuing to record low, but positive growth. GDP expanded by ½ per cent in the first half of 2012 relative to the same period of last year. The shift in the composition of activity – away from domestic demand and into the exporting sectors – that has characterised developments in recent years is continuing. Support for overall activity is coming from the exporting sectors, with services exports becoming an increasingly important engine of growth in recent quarters. The most recent figures show a year-on-year increase in services exports of 9.0 per cent in Q2. This, in no small part, reflects the improvements in price and cost competitiveness that have been evident since the onset of the crisis.
Domestic demand, on the other hand, remains weak. Households, firms and the government sector are still working through the imbalances built up during the boom. Available high-frequency indicators point to a continuation of the divergence between domestic and export-facing sectors well into this year. A return to sustainable growth will require these imbalances to be worked through. In particular, we will need to restore order to the public finances.
We will also need further improvements in our competitiveness and a banking sector capable of supporting real economic activity. These are the areas in which government policy is focused.
The ongoing rebalancing of activity continues to have adverse implications for the labour market, given that the employment content of export-led activity is typically lower than that for activity driven by domestic demand. Employment has continued to fall in the first half of the year, with job losses being recorded in a majority of sectors. Notwithstanding this, unemployment has shown some tentative signs of stabilisation over the course of the year, albeit at a level that is too high (14.8 per cent).
The emerging picture is one of modest growth in the second half of this year, with a positive contribution from net trade offsetting further weakness in domestic demand.
