Dáil Éireann Debate, Thursday - 16 June 2022
82. Deputy Richard Bruton asked the Minister for Finance the way in which the prospects for the forthcoming Budget will be impacted by the international turmoil currently being experienced and higher energy and interest costs; and if he will make a statement on the matter. [31243/22]
Amharc ar fhreagraThe war in Ukraine has fundamentally altered the economic outlook and generated significant economic headwinds, both in Ireland and throughout the world.
At the time of the Stability Programme Update 2022 (April), my Department projected growth in modified domestic demand - my preferred domestic indicator - of 4¼ per cent this year, followed by an increase of just below 4 per cent next year. These forecasts were produced against a backdrop of unprecedented uncertainty and geopolitical instability and, as such, the margin of error around these point estimates was very wide.
My Department identified several downside risks to the projections at the time and our best assessment is that many of these have now materialised. For example, inflation has proved to be higher, broader and more persistent than initially assumed, while the external environment is less benign. The stance of monetary policy has become less accommodative, and the higher cost of funds will have an impact for households, firms and government.
The Government has introduced a series of measures to ease the impact of rising prices, with €2.4 billion in announced cost of living measures so far, including measures announced in Budget 2022 . Whilst we will continue working to ensure the fallout is minimised for those who are least-equipped to respond, we cannot cushion the impact for all.
On a positive note, the labour market has remained resilient despite these challenges. Employment growth was strong in the first quarter, with a record 2½ million people in employment, while the unemployment rate fell to 4.7 per cent in May, its lowest rate since 2006. Wages are also growing strongly, in part as a result of shortages in some sectors.
The Government will publish the Summer Economic Statement in the coming weeks, setting out the fiscal and macroeconomic parameters that will underpin Budget 2023.
