Dáil Éireann Debate, Wednesday - 17 April 2019
101. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which his Department can forecast economic prospects over the next five years in view of the variety of potential challenges globally; and if he will make a statement on the matter. [18039/19]
Amharc ar fhreagraThe Irish economy continues to grow at a robust pace, with annual GDP growth of 6.7 per cent in 2018. However, over the last number of months uncertainty in the external environment has increased substantially. The pace of growth has slowed in Ireland's key export markets, with a loss of momentum particularly evident in both the euro area and the UK. Accordingly the Department of Finance has revised down its forecast, relative to Budget 2019, for GDP by a quarter of a percentage point this year and next.
As published in the Stability Programme Update for 2019, my Department is forecasting GDP growth of 3.9 per cent this year and 3.3 per cent next year. Over the medium term, GDP is expected to at around 2 1/2 per cent, with positive contributions from both net exports and domestic demand.
As regards Brexit, the Department’s projections assume that a transition period will be agreed that extends or replicates existing frameworks until end-2020, i.e. the UK is assumed to remain in the single market and customs union during this period. From 2021 onwards, the baseline forecasts assume that the EU and UK conclude a trade agreement. This form of agreement results in any lower level of GDP over the 2021-2023 period relative to a hypothetical no-Brexit baseline scenario.
Despite the relatively positive outlook for our economy, the risks over the coming years are numerous and primarily external in nature. First and foremost is the ongoing uncertainty around Brexit. Secondly, given Ireland’s position as a small open economy with a high degree of integration in global value chains, any further disruption to trade or a slowdown in global growth would have a disproportionate impact on the Irish economy. Over the medium term, the principal risks relate to potential overheating as the economy approaches full-employment.
The best way we can mitigate against these risks is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies.
