Dáil Éireann Debate, Tuesday - 9 May 2023
229. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the Government's economic policy continues to be able to withstand economic shocks; and if he will make a statement on the matter. [21778/23]
View answer230. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department continues to monitor any and all potential economic threats to the economy here and retain the ability to respond in the event of unforeseen difficulties; and if he will make a statement on the matter. [21780/23]
View answerI propose to take Questions Nos. 229 and 230 together.
Over the last number of years, the Irish economy has faced numerous economic shocks in quick succession. Brexit, the Covid-19 pandemic, and most recently, the inflationary cycle brought about mainly as a result of Russia’s invasion of Ukraine, have each posed significant challenges to the Irish economy.
Throughout each of these shocks, the Irish economy has proven to be remarkably resilient. Ireland’s economic fundamentals remain strong and this has been most clearly evident in the labour market. A record 2.6 million people were in employment in the fourth quarter of last year, while the unemployment rate stood at just 3.9 per cent in April. Despite inflationary pressures on households’ real incomes, personal consumption remained robust in the fourth quarter, aided by a strong labour market and a buffer of ‘excess savings’ built up during the pandemic years.
While recent evidence suggests that we are now past the peak of this inflationary cycle, the inflationary and economic outlook remains highly volatile. The recently published Stability Programme Update outlines a number of short and medium-run risks to the outlook.
In terms of the near-term inflationary outlook, it is possible that further disruption to energy supplies or harsh weather conditions coming into the winter ahead could exacerbate imbalances between supply and demand and cause energy prices to spike again. Furthermore, there is a real risk of a wage-price spiral emerging as the economy is clearly operating at, or possibly beyond, full employment and prices remain elevated. My Department also continues to monitor the possibility of an emergent sector or firm-specific shock in the multinational sector which could be damaging to the economy. I am also cognisant of the profound medium-term challenges that the Irish economy will inevitably face, such as an aging population and the dual transition of digitisation and decarbonisation.
Given our strong economic fundamentals, I am confident that we will be prepared for and able to respond to these, and other, economic threats.
