The forecasts produced by my Department in early December, as part of the Budget 2013, anticipate further modest GDP growth this year. These forecasts were predicated on a number of technical assumptions, which were outlined at the time. Regarding the euro-sterling exchange rate, the technical assumption (which is a standard international approach) was that the rate would remain unchanged at levels which prevailed at the time, implying an average rate of stg £0.81 during 2013. However, since the beginning of the year there has been a marked appreciation of the euro against sterling, with the bilateral rate appreciating by approximately 6 per cent between the beginning of January and the end of February.
Exports to the UK represent about a fifth of total exports and therefore Irish exporters will naturally be sensitive to exchange rate developments. However, the substantial and continuing progress made in improving our competitiveness over recent years should provide some buffer in this regard. For example, the European Commission in its most recent forecast projects growth in wages of 0.3 per cent in Ireland and 2.7 per cent in the UK this year. That is not to downplay the significance of the euro-sterling bilateral rate, especially for the indigenous exporting sector, and I am conscious of this.
I would also point out that a large share of Irish consumer goods are sourced from the UK, so that the recent appreciation of the euro-sterling bilateral rate should help to protect real income by depressing import prices. Finally, I would highlight the fact that my Department will publish revised forecasts in April, taking into account all relevant information.