Dáil Éireann Debate, Thursday - 14 February 2019
36. Deputy Bernard J. Durkan asked the Minister for Finance if he has identified issues likely to impact negatively on the competitiveness of the economy; if so, the corrective measures he has put in place; and if he will make a statement on the matter. [7347/19]
Amharc ar fhreagra67. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he monitors the competitiveness of the economy; the degree to which challenges thereto have been identified; the corrective action in relation to same; and if he will make a statement on the matter. [7617/19]
Amharc ar fhreagraI propose to take Questions Nos. 36 and 67 together.
Improvements in Ireland’s competitiveness have been central to the recovery in the Irish economy. Since 2008, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 21 per cent.
The restoration of competitiveness has been hard-won through improvements in productivity, along with wage and price moderation. Over the medium term, the domestic economy is expected to act as the primary driver of growth. In this context, we must remain cognisant of the potential upward pressure this will place on both prices and wages, that could give rise to a loss of competitiveness.
Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. In December 2018, annual inflation as measured by the Harmonised Index of Consumer Prices was at just 0.8 per cent, having averaged 0.7 per cent throughout 2018. This follows five consecutive years of inflation below 1 per cent. Although price pressures have emerged in both the housing and the rental markets, this reflects the undersupply of housing over the last number of years, rather than evidence of over-heating pressures.
In terms of domestic risks, while the baseline projections assume that some moderate overheating pressures will emerge over the medium-term, particularly in the context of the expected increase in housing output, these pressures could be more significant than expected with the potential to generate imbalances over the coming years and impact on competitiveness.
As I outlined in Budget 2019, our economy is also facing a number of external risks. These risks primarily relate to a more adverse-than-expected outcome from Brexit, a rise in protectionism and a faster than expected normalisation of monetary policy. There is also continuing evidence of a slowdown in global growth, as has been recently reported by the IMF and the European Commission.
As many of the risks we are facing are external and thus beyond our control, the best way we can mitigate against them is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies, particularly those that increase productivity. Through the National Development Plan in particular, we are investing significantly to address the bottlenecks to growth which emerged of late, such as the need for residential development and public infrastructure investment. This should ensure that our economy remains competitive and avoid the build-up of bottlenecks that could limit our growth potential.
