Dáil Éireann Debate, Thursday - 23 June 2016
100. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that all economic indicators remain stable and consistent with requirements; and if he will make a statement on the matter. [17764/16]
View answerRecent indicators have generally been very positive, indicating the economic recovery is continuing in a sustainable manner. In the Stability Programme Update, published at the end of April, my Department forecast that the economy would grow by 4.9 per cent in 2016 and by 3.9 per cent in 2017. Furthermore, over the remainder of the forecast horizon out to 2021, growth rates are forecast to move towards its potential growth rate, estimated at around 31/2 per cent per annum.
Importantly, economic activity is now more balanced between domestic and external sources of growth. While the recovery in economic performance was initially led by the export sector, domestic demand is now making a strong contribution. This is very important as the domestic sectors are both jobs rich and tax rich.
The economic recovery is also clearly evident in the labour market where we have now had fourteen successive quarters of employment growth. Last year, employment increased by 2.6 per cent, equivalent to 50,000 new jobs.
Recent data published indicate that:
- The volume of retail sales increased by 5.1 per cent year-on-year in April 2016.
- New cars licensed for the first time were up almost 25 per cent to end-May year-on-year.
- The Purchasing Managers' Index showed continued expansion in the construction sector.
- While consumer sentiment has moderated somewhat it still remains well above the long-run average.
- Employment grew by 2.4 per cent over the year to Q1 2016, equivalent to an increase of 46,900 jobs.
- The unemployment rate fell to 7.8 per cent in May, seasonally adjusted, down from 9.6 per cent a year earlier. This is the lowest rate of unemployment since December 2008.
The positive outlook for Ireland's economic prospects is shared by the 3 major credit ratings agencies. Following Moody's upgrade to an A rating, all 3 have now given an A-Grade to Ireland's sovereign debt.
However, there are several sources of uncertainty. Weaker than expected trading partner growth would negatively impact on Irish growth through reduced exports. Growth in Emerging Market Economies disappointed in 2015, and while Ireland's direct trade exposure remains relatively small, we would be exposed to a more generalised slowdown in the world economy. The upcoming referendum on EU membership in the UK is another downside risk facing the Irish economy with Ireland potentially more exposed than most to a UK exit. Figures published this month showed a deceleration in merchandise trade which may be indicative of a delayed spillover from the slowdown in global trade observed in 2015. Net goods exports, however, continue to contribute positively.
Domestically, the high level of private debt, while falling, remains a concern, and any deterioration in the external environment could prompt households and firms to raise the pace of deleveraging, with adverse implications for domestic demand.
This uncertainty highlights the importance of prudent management of the public finances and of competitiveness-oriented policies that would help the Irish economy to weather any global economic downturn that may emerge.
In summary, I am satisfied that the economic indicators remain stable and broadlyconsistent with the outlook parameters in the Stability Programme Update published in April. However, this is critically contingent upon implementing appropriate polices and that is what the Government intends to do.
