Dáil Éireann Debate, Wednesday - 16 January 2013
157. Deputy Thomas P. Broughan asked the Minister for Finance if he will outline the range of possible growth scenarios for 2013 and their potential impact on the economy here and the impact on the amount of money needed to run the State in 2013; and if he will make a statement on the matter. [1453/13]
View answerMy Department’s latest forecasts are set out in the Economic and Fiscal Outlook which accompanied Budget 2013 and which was based on the Medium Term Fiscal Statement (MTFS) published on 24 November 2012. The baseline scenario is one in which real GDP grows by 1.5 per cent this year. However, there is considerable uncertainty attached to the outlook at present, given the somewhat fragile situation in many of our main export markets. There is also uncertainty attached to the outlook for domestic demand in Ireland this year – for instance it is unclear how the household savings rate will evolve in the short term.
In this context, the MTFS outlines the impact of a number of scenarios based on the ESRI’s macroeconomic model (HERMES). For instance, it is estimated that a 1 per cent reduction in world growth relative to the assumptions upon which the Department’s forecasts are based, would lower the real level of Ireland’s GDP relative to the baseline projection by 1.4 per cent in 2013 and add around 0.5 percentage points to the general government deficit. These HERMES results are broadly symmetric - similar but opposite results could be expected in the event of stronger-than-assumed world growth.
In addition, a one percentage point fall in the household savings rate relative to the assumptions would boost GDP growth by around 0.4 per cent this year relative to the baseline and improve the deficit by around 0.2 per cent. Again, these results are broadly symmetric.
