Update: Economic Growth 4th July 2014

4th July 2014 - Bernard Durkan TD

QUESTION NO: 27

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)

by Deputy Bernard J. Durkan

for ORAL ANSWER on 03/07/2014

To ask the Minister for Finance the extent to which the economic situation has improved over the past three years with particular reference to the need to identify borrowing and debt ratios within the confines of the agreement with the Troika; the extent to which economic growth is likely to impact on borrowing requirements and meet economic targets in 2015; and if he will make a statement on the matter.

REPLY.

Firstly, it is important to clarify that we have exited the EU-IMF Programme of Financial Support and we are now subject to EU Post-Programme Surveillance and IMF Post-Programme Monitoring. However, Ireland continues to be bound by the Excessive Deficit Procedure which requires that the underlying General Government deficit is reduced to less than 3% of GDP by 2015.

It is clear that the economic situation has improved considerably over recent years as evidenced by the recovery in the labour market. With specific regard to the fiscal ratios, the deficit ratios have been consistently over-achieved. The debt-ratio is estimated to have peaked in 2013 at over 120% of GDP before declining over the forecast horizon.

Economic growth obviously has impacts on Ireland’s ability to meet the fiscal targets and associated borrowing requirements. However, there is no simple answer with regard to the impact of different headline growth rates on the deficit as the exact impact would depend on the composition of growth. For example, growth driven by exports does not have as significant an impact on the public finances as domestically driven growth. A rule of thumb estimate is that for every extra percentage point of GDP growth, the deficit improves by between ¼ and ½ percentage points depending on the composition of growth.

Update: Economic Growth 4th July 2014

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