Michael Moynihan
Question:84. Deputy Michael Moynihan asked the Minister for Finance if he will report on his address to the National Economic Dialogue conference and the competitiveness of Ireland. [27990/19]
View answerTuesday, 24 September 2019
Questions (84)
Written answers
The fifth National Economic Dialogue (Dialogue) took place on June 26th and 27th this year.
The dialogue is an important part of the budgetary process and aims to foster discussion on how best to sustain and strengthen the economy while addressing the many competing economic and social priorities within the limited resources available.
My opening remarks on Understanding the Context: Economic Perspectives and my closing remarks at the Dialogue are available at www.budget.gov.ie along with the Chair’s report on the discussions.
Overall our economy is in good shape and is expected to grow this year and next. Modified domestic demand, an underlying measure of growth in the economy, grew by 4.5 per cent for 2018 as a whole.
One of the best barometers of the health in the economy is the labour market. The strong growth in employment over the last number of years has continued into this year, with total employment increasing by 45,000 (+2.0 per cent) in the year to Q2 2019. As a result, there are now 2.3 million people at work in Ireland.
The cornerstone of our recovery, has been the improvement in our competitiveness. Since July 2008, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 22 per cent. The improvement in our competitiveness reflects the hard-won productivity gains made over the last number of years, alongside wage and price moderation.
Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. In the first eight months of 2019, average annual inflation of just 0.9 per cent was recorded.
On wage developments, while average annual earnings grew by over 3 per cent in 2018, this came on the back of a near decade of low or negative growth in earnings. The rise in labour income is a welcome development. However it needs to be monitored closely, as a significant acceleration in wages could undermine Ireland’s relative competitiveness to other European countries.
Over the medium-term, the domestic economy is expected to act as the primary driver of growth. In this context, we must remain conscious of the potential upward pressure this will place on both prices and wages, that could give rise to a loss of competitiveness.
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.