Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I welcome the opportunity to discuss the stability programme update. The stability programme sets out the Governments macroeconomic and fiscal forecasts for Ireland and is the first update of the Government's projections since budget 2017 was introduced in October of last year. The stability programme is presented in draft form - I am, as usual, willing to take on board constructive suggestions from Deputies. The final version will be submitted to Brussels later this month. The macroeconomic forecasts underpinning the stability programme have been endorsed by the Irish Fiscal Advisory Council.

Turning first to the economic situation, I am greatly encouraged by the latest data showing that the economy grew by 5.2% last year with strong contributions from consumption and, in particular, investment spending. The Department of Finance has increased its GDP growth forecast this year to 4.3%, reflecting the stronger economic momentum in the second half of last year. For next year, GDP growth of 3.7% is forecast. From 2019 onwards, with positive contributions from both exports and domestic demand, the economy has the capacity to grow by approximately 3% per annum.

The economic recovery is most clearly evident in the labour market, with employment growth of 2.9% recorded last year. The latter represents the addition of 56,000 jobs. As a result, there are now more than 2 million people at work for the first time since 2008. My Department is forecasting a continuation of robust employment growth over the forecast horizon and, on this basis, by the end of the decade there will be more people at work in Ireland than ever before. Accordingly, unemployment is set to fall to approximately 5.5% by 2019 down from a peak of over 15% in 2012.

Turning to 2017 and beyond, the latest Exchequer returns demonstrate that the Government continues to deliver on its commitments. While tax revenues were slightly below expectation, it still remains too early to discern any firm trends. However, it is important to point out that annual growth has been reasonably strong with tax receipts 3.2% higher compared to the same period in 2016. The performance of VAT has been very encouraging with receipts up over 17% or €673 million in annual terms.

On expenditure, it is reassuring that spending is being managed by Departments within their allocations, with overall expenditure on delivering public services below profile. Capital investment on infrastructure is slightly ahead of profile and well up on last year, reflecting increased expenditure on the housing programme.

The general Government deficit of 0.4% of GDP projected for this year is unchanged from budget 2017. In addition, it is important to point out that our primary fiscal policy objective is to achieve a balanced budget in structural terms. This is now within sight. Taking account of the current trajectory and assumptions set out in the stability programme update, I am pleased to reiterate that we will achieve this medium-term objective of a balanced budget in structural terms in 2018.

Our second priority in fiscal policy is to reduce the level of public indebtedness and we are making significant progress in this respect. Our general Government debt-to-GDP ratio peaked at over 120% in 2012. This declined to 75.4% for 2016 and 72.9% for 2017. As a result, Ireland is on track to achieve a debt-to-GDP ratio of 60% early in the next decade. Colleagues are aware that 60% is the target set under the European fiscal rules for debt-to-GDP ratios.

Despite the strong momentum, a continuation of robust growth cannot be taken for granted as there are a number of significant risks on the horizon that could potentially derail the recovery. Principal among these are the potential fallout from the UK's exit from the European Union and uncertainty associated with the policy stance in the US. The best way of dealing with these risks is through prudent management of the public finances and competitiveness oriented policies. This approach helped create the recovery and it will help ensure sustainable growth in the years to come. This is what the Government will continue to do. I thank the Chairman and colleagues for their kind attention.