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National Development Plan Data

Dáil Éireann Debate, Thursday - 22 March 2018

Thursday, 22 March 2018

Ceisteanna (64)

Dara Calleary

Ceist:

64. Deputy Dara Calleary asked the Minister for Public Expenditure and Reform the GDP growth forecasts for each year up to 2027 upon which the national development plan is based; if these growth forecasts account for Brexit as outlined by both the ESRI report and the Copenhagen report on Brexit; the amount of the available fiscal space for 2019, 2020 and 2021 that has been used up from the national development plan; if the Exchequer borrowing requirement will be raised as a result of the national development plan; if the Irish Fiscal Advisory Council, IFAC, has been consulted specifically in relation to the borrowing requirements; and if he will make a statement on the matter. [11317/18]

Amharc ar fhreagra

Freagraí scríofa

Macro-economic projections adopted in the Plan for the period 2018-2021 are detailed in Annex 3 of the Economic and Fiscal Outlook for Budget 2018. As set out in the NDP, a potential growth rate of 2% in volume terms is assumed over the period 2022 to 2027. This potential growth rate aligns with the most recent long-term growth projection from the European Commission for Ireland for the 2020s while being lower than the OECD long-term projection of almost 3% for that period.

The prudent approach taken to the macro-economic and public capital investment framework in the plan is confirmed in terms of Ireland’s historic growth performance averaging about 4½% over the whole of the period from 1966 – 2017. The 2% real growth assumption for 2022 to 2027 is supplemented with the conventional assumption that inflation will average 2% in line with the upper limit of the ECB’s inflation target yielding a 4% nominal growth projection over the period.

The projections used for the National Development Plan are appropriately prudent and conservative in light of the research carried out by the ESRI and Copenhagen Economics on Brexit. According to the Copenhagen Economics study, the more recent of these reports, in a scenario of a European Economic Area (EEA) agreement with the U.K. potential growth in the period 2030 is projected to be reduced to an annual average of 2%. Similarly, a hard Brexit is projected to reduce potential growth in the period to 2030 to an annual average of 1.7%. The baseline in that report is 2.2% growth in GDP per annum.

This is compared to the 2% projection underlying the NDP. Furthermore, the Copenhagen Economics study does not take account of the impact of the very substantial public capital programme contained in the NDP on the supply side of the economy and productivity – the key driver of long-term economic growth.

In terms of fiscal space, the NDP announced four new funds which will begin operating from 2019. The funds will be partly covered by an unallocated capital reserve in the first instance, leaving an additional cost, which will both pre-commit unallocated fiscal space and impact on the Exchequer Borrowing Requirement (EBR). The EBR and general government debt developments table will be updated in the draft Stability Programme Update for 2018 to be published in mid-April.

The estimated cost, in fiscal space terms, of the four funds is €144 million over the period 2019-2021 as follows:

€ - millions

2019

2020

2021

Fiscal Space Used

54

36

54

The Deputy may wish to note that the Economic and Fiscal Outlook published by the Department of Finance at Budget-time last year projected that Ireland will move from a small General Government Deficit as a share of GDP to a General Government Surplus approaching 1 per cent of GDP by 2021, inclusive of the projected infrastructure spending in the National Development Plan.

It is also important to state that this approach is fully in line with the fiscal rules. While my Department did not consult with the IFAC in relation to the National Development Plan, my Department did note IFAC's broad support for the Government's proposed approach to increased public capital investment, in its November 2017 Fiscal Assessment Report.

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