Willie O'Dea
Ceist:9Deputy Willie O’Dea asked the Minister for Finance if he will confirm his latest GDP and GNP forecast for the economy here in 2012; and if he will make a statement on the matter. [19295/12]
Amharc ar fhreagraWednesday, 18 April 2012
Ceisteanna (12)
Freagraí ó Béal (12 píosaí cainte)
The budget day forecasts were for GDP growth of 1.3% this year and GNP growth of 0.7%. These figures were in line with the prevailing consensus at the time. Moreover, it is worth stressing that the Irish Fiscal Advisory Council, in its second assessment report, outlines that the budget day macroeconomic forecasts were appropriate at the time. Since then, forecasts for growth in some of our major trading partners have been revised downwards, while available data suggest that domestic demand - mainly personal consumer spending and investment - may be slightly weaker than assumed.
Having said that, not all of the recent economic indicators have been negative. For instance, the latest data provide tentative indications that the labour market may be stabilising, while purchasing managers indices have been moving in the right direction over recent months. Consequently, there is a lot of uncertainty. Officials in my Department are assessing all the available information with a view to producing revised forecasts at the end of this month. These will be published in the stability programme update, which all member states in the EU are producing as part of the so-called European semester.
This is similar to a question taken earlier. I take it from the Minister's response that the revised forecasts have not yet been finalised. However, he has indicated clearly a number of times that a further downward revision is anticipated. Such a revision took place on budget day last December and another will take place at the end of April. However, the Minister also has indicated it will not affect directly the achievement of the fiscal targets in 2012. Nevertheless, the Minister must be concerned by the analysis carried out by the Irish Fiscal Advisory Council on the impact of nominal GDP being 1% lower, between now and 2015, than the Department's projections to date. Nominal GDP being just 1% lower than what has been forecast is a highly possible scenario. In such circumstances, the debt to GDP ratio would reach 125% and continue to rise rather than moving on to a downward trajectory. The Minister must be concerned, not so much about the short-term impact in 2012 but rather with regard to the impact in later years in the context of realistic growth rates being achieved. He must also be concerned about the impact the latter will have on fiscal consolidation.
I take the advice of the fiscal advisory council very seriously. The council provides very good analysis, which is carefully worked out, and offers prudent advice. I will certainly take cognisance of the advice we receive. We are taking steps to grow the economy. As the Deputy is aware we have a very detailed job-creation plan in place and this is being driven forward strongly through the provision of quarterly reports. We hope that despite the difficult circumstances in our customer countries, we will continue - as was the case last year - to grow the economy. If we could achieve stronger growth rates, these would obviously be of benefit to everybody. We are living in times of great uncertainty. That uncertainty continues to hold sway across Europe. It appears that the United States is emerging from the difficulties in which it found itself but the position in this regard is not absolutely certain. I would not like to make predictions in the first half of this year - over which I could be expected to stand - until matters settle down. One can speculate and be optimistic but there is quite an amount of volatility abroad. It is, therefore, difficult to build a model in respect of the accuracy of which one could vouch as we move towards 2015.
The Minister seems to be basing his outlook on a defiance of gravity. At some point, the revising downward of forecasts for growth - such revisions are pretty much universal at present - has an impact on actual growth. The Minister appears to be stating that despite this and an analysis which he says he takes seriously and which projects a reduction in growth - this will eventually translate into a reduction in growth in our customer countries and in our economy - that growth is actually going to somehow continue here on foot of measures the Government is introducing. However, the fiscal advisory council has stated that this is not going to happen and that regardless of what the Government does growth is going to slow down, both here and in our customer countries. Is there not a sort of blind optimism on the Minister's part in respect of or a refusal to face what is clearly coming down the tracks? I take the point that we cannot solve matters on our own but does this not prompt him and European leaders to question the entire policy that is being pursued?
There is a chasm between the reality that exists and what the Minister is saying. He is dressing up uncertainty as potential growth, etc. Both Ireland and Europe have re-entered recession and exports are being hit. Some 50,000 people in the retail trade here lost their jobs in recent years and 1,800 businesses went bust in the past 12 months. In addition, 76,000 people - nine every hour - emigrated from the State last year. The list of statistics which damn the Government's economic policies is as long as both of one's arms. The Government appears to have a completely unrealistic view of or just simply does not know what is happening among ordinary people in this State. Each year, growth forecasts and tax receipts are revised downwards. It is time the Government began to revise its own policies in the same direction.
The Deputies are constantly mixing up two different policy positions and trains of thought. I am stating that for 2012, the marking downwards of the growth rate will not affect our ability to achieve the 8.6% target in respect of our deficit. On the evidence of the figures for the first quarter and in the context of an assessment of nominal growth in the economy, we will still realise that target. If we revise growth figures downward, it is, of course, a reflection that we estimate that less economic activity will take place here. This has an effect on job creation and is a development about which we are disappointed. However, we intend to address any of the causes of this development which may be internal in nature. In so far as the external causes are concerned, we will do our best in Europe to ensure that more demand-led programmes are put in place. I accept that the latter is not the main trend in Europe at present. We cannot influence the situation in the UK, which is one of our biggest customer countries. The US is having an impact because its economy is beginning to grow-----
Through the provision of a stimulus.
-----and this is sustaining our growth figures at present.
Why then sign a treaty that will prevent us from participating in demand-led initiatives?
If one mixes up all of the economic data into some kind of Boyd Barrett Irish stew, it will make no sense.
The Government is dependent on Keynesian policies.
I wonder whether Deputy Boyd Barrett would be the lamb or the spud in that stew.
Written Answers follow Adjournment.