Dáil Éireann Debate, Wednesday - 17 April 2019
50. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy performs robustly and competitively in line with other economies across Europe; if specific precautions are required at this juncture; and if he will make a statement on the matter. [17799/19]
View answer98. Deputy Bernard J. Durkan asked the Minister for Finance if specific issues affecting the competitiveness of the economy have been identified; if remedial action is required; and if he will make a statement on the matter. [18035/19]
View answerI propose to take Questions Nos. 50 and 98 together.
Our economy continues to grow at a robust pace, with GDP growth of 6.7 per cent in 2018. As a result, Ireland continues to be one of the fastest growing economies in Europe. I would like to stress that while the headline GDP figure can be exaggerated in an Irish context, other indicators such as consumer spending, modified domestic demand, along with taxation receipts confirm the robust growth in our economy.
Our economic health is most clearly evident in the labour market with more people working in Ireland than ever before (2.28 million) and the unemployment rate is now significantly below that of other Euro Area countries. The outlook for the economy remains positive over the coming years, with modified domestic demand, a more meaningful measure of underlying economic activity in Ireland, is set to expand by 4.0 per cent this year and 3.3 per cent next year.
The strength of our economy, in part, reflects the important steps we have taken to improve our competitiveness. Since 2008, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 22 per cent.
The restoration of competitiveness has been hard-won through improvements in productivity, along with wage and price moderation. However we cannot become complacent. As the National Competitiveness Council (NCC) highlighted in its recent report, there remains a number of bottlenecks at a sectorial level which impact on Ireland's cost competitiveness.
Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. For 2018 as a whole, Ireland’s inflation averaged just 0.7 per cent, this compares to an average inflation rate of 1.9 per cent for the EU as a whole. The comparatively low level of inflation in Ireland should help to maintain our competitiveness and protect real wage growth.
On wage developments, while average hourly earnings grew at 3 per cent in 2018, a noticeable increase on the growth rate of 1.7 per cent recorded in 2017, this came on the back of a near decade of low or negative growth in earnings. The rise in household incomes is a welcome development, however it needs to be monitored closely to avoid a significant acceleration in wages, which may undermine Ireland’s competitiveness relative to other European countries.
Despite the positive outlook for our economy, the risks over the coming years are numerous and primarily external in nature. The best way we can mitigate against these risks is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies. Through the National Development Plan in particular, we are investing significantly to address the bottlenecks to growth which emerged during the recovery, such as the need for housing and public infrastructure investment. This should ensure that our economy remains competitive and avoid the build-up of bottlenecks that could limit our growth potential.
