Tuesday, 27 May 2014

Questions (40)

Bernard Durkan

Question:

40. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the various economic indicators are positively positioned in the run-up to budget 2015; the extent to which he expects to be in a position to continue to meet the conditions laid down by the troika and at the same time address the specific issues likely to have a socio-economic impact; and if he will make a statement on the matter. [23024/14]

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Written answers (Question to Finance)

As the Deputy will be aware, my Department published updated macro-economic and fiscal forecasts as part of the 2014 Stability Programme Update last month. As detailed in these forecasts, my Department expects real GDP growth of 2.1 per cent for this year, with a continuation of the positive labour market developments we have seen recently. The data flow in the opening months of this year have been encouraging.  Sales in the retail sector were up by around 8 per cent in the first quarter when compared with the same period last year, with core sales (which excludes motor trades) up by around 2 per cent in the quarter.  This has been supported by a strenthening in consumer confidence.  The ESRI/KBC consumer sentiment indicator was at its highest level in over seven years in April, while the unemployment rate, having peaked at over 15 per cent in early 2012, remains on a downward trajectory, falling to 11.7 per cent in April. 

Having decided to maintain the tourism VAT rate at 9 per cent as part of Budget 2014, I am particularly encouraged to see that positive momentum in the sector in 2013 appears to have carried into this year, with trips to Ireland up by 7.3 per cent in the first quarter when compared with the same period  last year.

Developments in the construction sector have been equally encouraging in the year to date, with PMI data suggesting that activity in the sector expanded at is fastest pace since January 2006 in March, marking a seventh successive month of expansion for the sector. No sector was harder hit by the economic downturn than the construction sector and the Government remains committed to supporting a continued recovery in construction in the years ahead. The recently published Construction 2020 strategy will play an essential part in achieving this goal.

Economic activity in our key export markets is expected to strengthen this year, which will support Irish exports.  

Looking to the public finances, an underlying general government deficit of 4.8 per cent is forecast for 2014, well within the deficit ceiling of 5.1 per cent set by the ECOFIN Council in late 2010. Developments in the year-to-date are supportive of these projections, with cumulative tax revenues 2 per cent ahead of target at end April. Current projections suggest we remain firmly on track to bring our deficit below 3 per cent by 2015. However, we are not complacent. We left the EU-IMF programme at the end of last year having put in place the structural reforms required to ensure the mistakes of the past will not be repeated. While there is undoubtedly more to be done, we now face these challenges from a position of strength.

Question No. 41 answered with Question No. 10.