Dáil Éireann Debate, Wednesday - 1 February 2012
76 Deputy Bernard J. Durkan asked the Minister for Finance the extent, if any, to which economic performance over the next 12 months is likely to be affected by lack of confidence throughout the eurozone; the likely or appropriate measures to combat such situations; and if he will make a statement on the matter. [5830/12]
Amharc ar fhreagra77 Deputy Bernard J. Durkan asked the Minister for Finance if he is satisfied that the target and projections in respect of economic performance in respect of the next 12 months are retainable; and if he will make a statement on the matter. [5831/12]
Amharc ar fhreagraI propose to take Questions Nos. 76 and 77 together.
The Budget forecast is for real GDP growth of 1.3 per cent in 2012. This 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.
The ongoing euro area sovereign debt crisis is contributing to an uncertain economic environment. This, in turn, is impacting upon confidence in the euro area and weighing on the region's growth prospects.
Obviously as a small open economy whose recovery is being driven by exports, we in Ireland will be affected by the soft patch that the euro area is currently going through. However, the substantial competitiveness improvements we have seen in recent years will provide some support. It is also important to point out that a weakening of activity in our main trading partners is already factored into my Department's forecasts for economic growth that underpin the Budget.
The uncertainty, in particular internationally, 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, more recent forecasts and revisions reflect heightened concerns about the euro-area outlook. However, there have also been positive developments, not least of which is the trajectory for ECB interest rates which appears more favourable than when the forecasts were compiled at Budget time. In addition, recent exchange rate movements will provide some benefit for the exporting sector.
Over the coming months, my Department will continue to monitor the economic situation, both in terms of positive and negative developments and, as is the norm, will publish an updated macroeconomic assessment in the spring in the context of the Stability Programme Update. It is anticipated that the Update would be published in April in the context of the requirements under the European semester agreed by Member States last year.
In terms of the wider question regarding the resolution of the euro area crisis, my view is that we are now seeing concerted action to address the weaknesses that have become evident in the design of monetary union, including the so-called ‘six-pack' of legislative reforms as well as the agreement on a ‘fiscal compact' to ensure fiscal discipline in participating Member States.
Finally, it is also worthwhile pointing out that EU leaders on 30 January committed to further efforts to promote growth and employment in the Union, including through a better targeting of available EU funds and further steps to complete the Single Market.
