Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the Chairman. Given that I have appeared before various members of the committee on a few occasions this week, and given that I forwarded my statement to the committee earlier in the week, I propose highlighting three or four points and then letting the committee quiz me on the document. I could spend 20 minutes reading the statement aloud but colleagues may have read it. If not, I can highlight some of the main issues.

On economic growth and broad economic development, the main point is that we have revised downward our growth forecast for 2019 and 2020. For this year, we had expected the economy to grow by approximately 4.2% but we now expect it to grow by 3.9%. For next year, we expect the economy to grow by approximately 3.3%, which is another revision down from where we had expected it to be next year. The reasons for that are well known to the committee, namely, what is happening with global trade around the world, signs of a slowdown in different parts of the world, the debate taking place in the United States about its economy, what is happening in the eurozone, and various tensions such as that of global trade, which are all having an effect on our economy. Nevertheless, growth rates of 3.9%, and wage growth of 3% per head, remain good for the number of people who work in our economy and for our ability to invest in the economy for the long term. We have seen the sharp and high growth rates of the post-crisis period begin to moderate into ones which are real, can make a difference to people's lives, but are more mature and, therefore, one hopes, capable of being sustained for longer, which is good.

That brings us to the information I shared with the committee about our progress with that which makes a difference to most people's lives, namely, whether they have a job, whether they can find another job and whether they can keep the job they have. The comments I made about a growth rate lower than forecast but which can still make a difference to the lives of people are perhaps most evident in that even though we have seen a decrease in how we expected the economy to grow this year and next year, we are still seeing employment growth which, by many measures elsewhere in Europe and compared with where we were in our not-so-distant past, remains strong. Last year, some 63,000 jobs were created in our economy. Even with the slightly lower forecast for this year, we expect approximately 50,000 jobs to be created, which is a strong pace of employment growth. We expect to see wages within the economy grow by approximately 3% this year. Within that 3%, many sectors will grow more quickly while others will grow a little more slowly, but an average of 3% is below the rate at which our economy is growing. Of itself, it is unlikely to generate inflationary pressure, but if we were to keep it at that pace for a longer period, it would be a positive development for many people.

On the budgetary end of where we stand overall, I will comment briefly on the structural deficit and the top-line deficit. The European Commission, which has measured our structural deficit, indicates that we should move to a structural balance of minus 1.1% this year. The Commission is currently carrying out an assessment in that regard and may make comments later in the year. If, however, we consider a form of measuring our structural balance specific to our economy, developed by the Department of Finance and endorsed by the Irish Fiscal Advisory Council, IFAC, the forecast for this year is a structural balance of 0.1%, which is ahead of our target for this year. I remember being in this room years ago and having debates about what the structural balance is and is not. There are many ways of measuring and evaluating it. The Commission will view the figure of minus 1.1% as different from what it could and should be, but from the point of view of IFAC and the Department of Finance, the balance of 0.1% reflects our measurement of where we are and is ahead of where we were expected to be. From a top-line point of view, we believe that, all other things being equal, we will move to a surplus of 0.2% this year, which is ahead of where we expected to be this year. Were the trends in our economy to continue into next year, we believe we would move into a surplus of 0.4%, but that is on a no-policy-change basis and before any policy decisions have been made. My entire statement was written on a no-policy-change basis. Overall, our debt burden, which, as a percentage of GDP, is 61.1%, is expected to decline to 55.8% for 2020.

The committee will be aware that we use different forms of measuring national income, most notably GNI*. Using that as a ratio of debt to national income, we are still in excess of 100%.

The text of my opening statement contains figures for expenditure and tax forecasts. The tax forecast for the quarter is a little ahead of where we had anticipated. The VAT performance in particular is strong and our excise performance is the strongest it has been in some years. That said, these are the figures for one quarter only. May will be a key month from the perspective of VAT, corporation tax and expenditure. Total Government spending is below profile overall and in 14 of 17 Votes. However, this represents only a single quarter and the pre-summer period, from April until June, will be the crucial part of the year.

That is an overview of the key points in my statement. I will answer any questions members wish to raise.