Dáil Éireann Debate, Tuesday - 31 January 2012
116 Deputy Tom Fleming asked the Minister for Finance if he will clarify the relative importance of the divergence that now exists in the projected growth rate for this year between the December budget figure of 1.3% and the troika’s new estimate of 0.5%, in terms of any mid-term adjustment being considered for 2012; and if he will make a statement on the matter. [4876/12]
Amharc ar fhreagraThe Budget Day forecast is for real GDP growth of 1.3 per cent in 2012. The Budget Day forecast was prepared on the basis of economic information (domestic and international) available up to end-November 2011, and was mid-range at that time. Given the highly uncertain environment, the Budget documentation also pointed to a number of risks to this forecast — some to the downside and some to the upside. This uncertainty has continued into 2012 and is reflected in the wide range of GDP projections for this year, not just for Ireland, but also for the euro area. Indeed, the Troika's January forecast of 0.5 per cent growth reflects heightened concerns about the euro-area outlook.
While the Troika has revised down its real GDP growth forecast for this year, it still sees the overall deficit target of 8.6 per cent as achievable, albeit with risks — as is always the case with any forecast in any year. In this respect, it is important to highlight that it is the nominal growth rate of GDP (i.e. volume and price changes) which drives tax revenue and affects the various fiscal ratios. It is also crucial to point out that the Exchequer budgetary position at end-2011 was better than anticipated at Budget time, providing a small safety margin in terms of achieving the 2012 deficit target.
We are only a month into the New Year so talking about a mid-term adjustment at the moment is not appropriate. My Department will continue to monitor the economic and budgetary situation over the coming months, in particular the monthly Exchequer Statement, and this will inform official thinking on these matters. As is the norm, my Department will publish a revised set of economic and budgetary forecasts in the April Stability Programme Update.
