Dáil Éireann díospóireacht -
Wednesday, 14 Oct 1998

Vol. 495 No. 2

Written Answers. - Economic Climate.

John Perry

Ceist:

44 Mr. Perry asked the Minister for Finance his views on the concerns for the world economy expressed at the recent G7 meeting; the way in which he believes the growing world recession will impact on the Irish economy; and if he will make a statement on the matter. [19595/98]

Minister for Finance (Mr. McCreevy)

The economic and financial difficulties in Asia over the last year or so and more recently in Russia have created a climate of uncertainty and instability in the global financial markets. Growth prospects, particularly for the developing world have weakened significantly. There have been large falls in world stock markets and volatility in the dollar exchange rate. The International Monetary Fund and other international forecasting agencies have against this background revised downwards their projections for world growth next year.

As a small and highly open economy Ireland cannot expect to be immune from slower world growth. This will undoubtedly have a negative impact on our export growth and on foreign investment into this country which has been the main engine of our growth performance over the 1990s. However, among the industrial countries of North America and Europe — to which about three quarters of our exports go — the effects of the crisis on economic activity have so far been relatively small. While some deceleration in growth is in prospect the consensus view presently is that economic growth in the US and the EU is likely to remain reasonably robust. This should help minimise any negative impact of the global economic situation on Ireland's economic performance.

The EU, in the context of the new EMU environment, remains firmly committed to its key role in helping to support international financial stability. I intend to play a full part with my ECOFIN and EURO 11 colleagues to this end in the enhanced co-ordination of EU economic policy which accompanies the establishment of the euro. Indeed the creation of EMU should help to support economic stability at a global level reflecting strict internal policies within the euro zone relating to the achievement of price stability and the conduct of national budgetary policies. In the run-up to the 1999 budget I will be giving careful consideration to the broader international economic climate and its implications for the Irish economy. The less favourable international outlook for 1999 does not in any way weaken the need for a prudent stance in the 1999 budget. In fact it strengthens it.