asked the Minister for Finance if he will outline the main provisions of the Annual Economic Report of the European Commission in regard to economic policy in Ireland.
Written Answers. - Economic Policy Report.
147.
The Council of Minister is required, under Decision 74/120/EEC of 18 February 1974, to adopt an annual report on the economic situation in the Community and establish policy guidelines for each member state. As required by this decision, the Annual Economic Report for 1988-89 has been presented to both Houses of the Oireachtas.
The main focus of the report is on the need for rapid progress towards the completion of the internal market. It concludes that the Community's economic growth prospects are reasonably favourable. However, it stresses the necessity for a greater reduction in inflation rates, as well as in external and budgetary imbalances between member states.
In its guidelines for Ireland, the report notes the improvement in economic conditions achieved in this country. In particular, it refers to the exceptionally strong export growth, the improvement in competitiveness, the emergence of a surplus on the current external account, the substantial lowering of interest rates and the reduction in inflation. It also notes that strong measures have been initiated to rein in public expenditure and reduce the Government budget deficit, as had been urged in previous reports. GDP is expected to have expanded by nearly 3 per cent in 1988. A continuation of these favourable trends is forecast for 1989. Although the prospects for growth are brighter than for some years, the report considers that the process of budgetary adjustment must continue to take precedence in Ireland. A continuing reduction in the underlying Exchequer borrowing requirement in terms of GDP is, therefore, seen as desirable. This should be achieved mainly through cuts in public expenditure, but with greater emphasis on restraining current rather than capital expenditure. It also states that the restructuring of taxation continues to be desirable and must be financed within the constraint of the necessary budgetary adjustment.
The report sees the medium term challenge in Ireland as the need to restore further the conditions necessary to sustain a high rate of economic growth while maximising the employment potential of such growth. It considers that, given the need to pursue a policy of fiscal consolidation for some time ahead, growth and employment in Ireland will rely even more than in most other member states on a supplyside response to a more favourable economic environment. In this regard the report suggests that structural policies aimed at improving the efficient operation of markets continue to be appropriate, particularly in the context of the completion of the internal market.