Dáil Éireann Debate, Wednesday - 23 May 2012
90 Deputy Bernard J. Durkan asked the Minister for Finance the extent if any to which this country’s economic competitiveness has improved or otherwise fluctuated over the past twelve months; if there are particular areas deemed to require further efforts in this regard; and if he will make a statement on the matter. [25943/12]
Amharc ar fhreagraSubstantial progress has been made in terms of improving our competitiveness. Relatively lower price inflation over the last number of years means that Irish price levels have fallen relative to our major trading partners. At the same time there has been a significant improvement in our cost competitiveness. Indeed, the European Commission recently forecast that our nominal unit labour costs will have fallen by a cumulative 16.5 percentage points in the period 2009-2013 compared to an increase of 6.6 percentage points for the euro area as a whole. On foot of these positive developments, we have seen a recovery in our exports as well as an improvement in inward foreign direct investment, and I am encouraged by this. Having said that, further improvements in competitiveness are clearly needed in order to make significant inroads into the unacceptably high rate of unemployment that we are currently faced with.
93 Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economic fundamentals have changed in the course of the past three years with particular reference to the need to achieve established or accepted targets for borrowing, lending, growth and debt ratios; and if he will make a statement on the matter. [25946/12]
Amharc ar fhreagraFollowing three successive years in which output fell, positive growth returned to the Irish economy last year. The recovery is expected to continue this year, and to both broaden and gain ground in 2013. Over the medium term, a return to robust and more sustainable growth is foreseen. While exports are expected to continue supporting economic activity, a gradual pick-up in domestic demand is also projected as the recovery broadens further and spills over to the labour market. We have also seen that 2011 marked a record year for inward Foreign Direct Investment and the pipeline remains strong. All of this points to the fact that many of the underlying strengths of our economy remain, including a well-educated workforce, favourable demographics, an open and flexible economy and a pro-enterprise environment. Of course there are many challenges which we still face and it will take time to work through the legacies of the crisis. Not least of these is the high level of Government debt which we have accumulated as a result of the substantial fiscal deficits that were recorded in each of the last four years and the very significant costs of providing support to the banking sector. Substantial corrective action has been taken to return stability to the public finances and while General Government Debt is now forecast to peak at 120 per cent of GDP next year, it is expected to decline to around 117 per cent by 2015 based on the recent Stability Programme Update projections. Our public finances are showing signs of improvement after a number of very difficult years and we are on track to bring the deficit below 3 per cent of GDP by 2015, in line with the targets set.
As the Deputy is aware, the banking system restructuring plan creates capacity for the two Pillar Banks, Bank of Ireland and AIB, to provide lending in excess of €30 billion in the period 2011-2014. SME and new mortgage lending for these banks is expected to be in the range of €16-20bn over this period. This lending capacity is incorporated into the banks' deleveraging plans which allow for repayment of Central Bank funding through asset run-off and disposals over the period to 2013.
The Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved their 2011 targets. The pillar banks are required to submit their lending plans to the Department and the Credit Review Office (CRO) at the beginning of each year, outlining how they intend to achieve their lending targets. The banks also meet with the Department and the CRO on a quarterly basis to discuss progress. The banks provide my Department and the CRO with monthly returns outlining their SME lending figures, broken down at a sectoral and regional level. The monthly management meetings with the pillar banks also provide a forum for the issue of SME lending to be raised by my Department.
