Dáil Éireann Debate, Wednesday - 30 April 2014
85. Deputy Colm Keaveney asked the Minister for Finance if he will provide an estimate for the current size of the output gap; his views on the implications on same for taxation policy; and if he will make a statement on the matter. [19183/14]
View answerAs set out in the Stability Programme April 2014 Update, submitted to the European Commission yesterday, the output gap for 2013 is estimated at -1.3 per cent of GDP. A negative output gap indicates that the economy last year was operating below its potential. An output gap of -0.7 per cent is estimated for this year, on the basis of my Department's forecast for real GDP growth of 2.1 per cent.
These estimates are based on the revised methodology for estimating potential output recently endorsed at EU level. Given the openness of the Irish economy, however, there are major health warnings attached to estimates of the output gap for Ireland.
The output gap serves as a key input to estimating the structural budgetary position, that is the budget balance that would prevail in the absence of the economic cycle. In line with the fiscal rules, Ireland must return to a balanced budgetary position in structural terms by 2018.
The SPU set out projected tax revenues to 2018 consistent with this objective. Necessary revisions if any to spending plans or taxation policy required to meet this objective will be based on the most up-to-date economic and fiscal data available on Budget day each year.
