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Economic Policy

Dáil Éireann Debate, Thursday - 3 October 2013

Thursday, 3 October 2013

Questions (82, 88, 92, 94)

Bernard Durkan

Question:

82. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economic fundamentals now prevailing are in accord with the requirements for economic recovery while keeping pace with bailout requirements; and if he will make a statement on the matter. [41761/13]

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Bernard Durkan

Question:

88. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which it may be possible in the coming year to expect economic growth which might offset excessive budgetary cuts while at the same time maintaining targets agreed with the troika; and if he will make a statement on the matter. [41767/13]

View answer

Bernard Durkan

Question:

92. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the domestic economy can be encouraged to grow without affecting the future stability of the national economy; and if he will make a statement on the matter. [41771/13]

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Bernard Durkan

Question:

94. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which this country’s economic recovery remains on target and in line with expectation for exit from the bailout programme; and if he will make a statement on the matter. [41774/13]

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Written answers

I propose to take Questions Nos. 82, 88, 92 and 94 together.

The latest data from the Quarterly National Accounts show that real GDP increased by 0.4 per cent in the second quarter of this year. More high frequency data have also been encouraging and suggest a continuation of the positive momentum into the third quarter. In particular, I would point to signs of a modest recovery in domestic demand. Personal consumption increased by 0.7 per cent in the second quarter and strong retail sales in recent months are indicative of further growth in the third quarter. We have also seen a return to growth in ‘core’ (excluding planes) investment, with both construction and machinery and equipment now growing.

There has also been a marked improvement in labour market conditions over the last year, with employment having increased in each of the last four quarters. Employment was up by 1.8 per cent in annual terms in the second quarter, representing an additional 33,800 jobs over the year. The improvement in labour market conditions has also been reflected in the unemployment rate, with a standardised unemployment rate falling to 13.3 per cent in September, having peaked at 15.1 per cent early last year.

These indicators point to a modest recovery in the Irish economy. My Department will be publishing updated forecasts for 2013 and 2014 along with the Budget on 15 October which will take account of developments in the interim and which must be independently endorsed by the Irish Fiscal Advisory Council, in line with the European regulation on common provisions for monitoring and assessing draft budgetary plans. The forecasts produced by the Central Bank yesterday suggest moderate growth this year as weaker export growth drags on the headline figure, with the rate of expansion set to pick up in 2014.

On the fiscal side, we continue to meet and exceed our budget deficit targets. It should however be noted that part of our current deficit is structural; in other words, economic recovery alone will not be sufficient to correct the deficit. However, we have made significant progress in reducing the structural deficit in recent years and most of this correction has already been done. Ireland’s considerable efforts in restoring our public finances to a sound footing has not only been reflected in the deficit figures but has also had significant confidence effects. Ireland’s 10 year bond yield has fallen by over 10 percentage points since peaking in July 2011, facilitating Ireland’s return to the market for long-term financing earlier this year.

As Ireland’s EU-IMF Programme of Financial Support comes to an end this year the Government’s focus is now firmly fixed on achieving a successful and durable exit from our programme, and a full and sustainable return to the financial markets, and we are doing all we can to this end. Macroeconomic developments thus far are supportive of the projected reduction in debt and deficit in the post-programme environment.

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