Dáil Éireann Debate, Thursday - 10 November 2016
93. Deputy Joan Burton asked the Minister for Finance the status of the proposed development of alternative models for forecasting medium term potential growth as has been suggested by the Irish Fiscal Advisory Council as an additional safeguard for detecting overheating in the economy. [34103/16]
View answerEnsuring the plausibility of estimates of potential growth is a key priority given their significance in the application of the fiscal rules. As previously noted by both my own Department and the Fiscal Advisory Council, the Commonly Agreed Methodology (CAM) for estimating potential output is subject to limitations particularly when applied to Ireland. My Department continues to assess the merit of alternative models for estimating potential output for Ireland. Considerable work has been undertaken on this front to assess both the plausibility and importantly the stability of these alternative estimates. An outline of this work is set out in Box 1, page 24 of the Stability Programme Update 2016 (SPU), published in April. This work was further updated in the slides presented to the Budget Oversight Committee and to IFAC. Whilst the intention has been to publish this technical work revisions to national accounts data and data limitations in respect of the underlying current account have delayed this.
Notwithstanding the advance of alternatives models, for the purposes of assessing the cyclical position of the economy in the context of fiscal monitoring, the CAM remains the relevant legally binding metric. In addition to developing alternative models efforts continue to be undertaken at technical level in Europe to improve the performance of the CAM, to which Ireland continues to actively contribute.
In addition to these models, when assessing the cyclical position of the economy, my Department takes into consideration a wide range of other indicators beyond those considered as part of the CAM. My Department will remain vigilant to signs of overheating and the Government will continue to pursue sensible policies aimed at ensuring sustainable growth and public finances.
