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

I thank the Cathaoirleach and members for the opportunity to be here today, with the Minister, Deputy Chambers, to discuss the annual progress report for 2025. I offer my congratulations to Deputies O'Donoghue and Timmins on their election as Cathaoirleach and Leas-Chathaoirleach, respectively, of this very important committee.

By way of background, the publication of the annual progress report replaces the annual publication known as the stability programme update, SPU. The report sets out my Department's assessment of the economic and budgetary situation and outlook. I stress at the outset that the document is prepared on the basis of existing Government decisions.

As members know, the Government published Ireland's first medium-term fiscal and structural plan last October. An additional objective of the annual progress report is to report on implementation of that plan. The document details expenditure growth last year relative to planned expenditure and provides updates to the reforms and investments set out in the medium-term plan.

Regarding the economic background, as members are well aware, the global trading environment we are now facing looks very different from what we became accustomed to in recent decades. The use of tariffs is a symptom of a new normal in the context of a trading environment that is increasingly characterised by fragmentation and division. The introduction of tariffs is deeply regrettable. They drive up the price of consumer products and create uncertainty for firms as to how to invest their money. Given where we are right now, they create a real risk of a lose-lose environment. That is why the Government remains actively engaged in discussions at a European level and with our counterparts in the United States to see whether we can agree an alternative approach to support the global economy.

I turn to where we stand in Ireland. Modified domestic demand, which I consider the best measure of how our economy performs in a way our citizens can see, grew by 0.8% in the first quarter of this year. This reflects the strength in our jobs market. Indeed, the number of people at work in Ireland reached a record high of 2.8 million in the first quarter, while inflation has been at or below 2% for a year. However, as I mentioned, global changes create an increasingly uncertain economic environment that will weigh on our growth.

The baseline forecasts in the annual progress report were done on the assumption that no tariffs would be introduced. Under that assumption, we expected our economy to grow by approximately 2.5% this year and by 2.75% next year. However, my Department also produced an alternative scenario that attempted to incorporate the potential impacts of tariffs that were in place in April. On that basis, we estimated growth would be 1.5 percentage points lower by the end of 2026 relative to where we hoped to be. I emphasise the difficulty in making confident predictions at this time.

With regard to the budget outlook, the Minister for public expenditure and I recently published the Exchequer returns for May, which show an overall headline surplus of €4 billion. If we exclude once-off revenues from the decision by the Court of Justice of the European Union, there was a surplus of €700 million, which is a bit lower than in the same period last year. For the year as a whole, we are still projecting a general government surplus of €8.7 billion, which is the equivalent of 2.6% of modified national income.

Our economy has demonstrated remarkable resilience in the face of numerous shocks in the past decade. More people are employed in our country than ever before. The careful management of our public finances in recent years has given us budget surpluses that afford us the firepower to respond to future challenges from a position of strength. With all the changes going on, the Minister for public expenditure and I will work closely together on the policy areas where we can exert influence, namely, competitiveness, investment and other decisions that matter not just today but over the long term. In the coming months, we will formulate the broad parameters of our budget strategy for the year. That began last week with the national economic dialogue and will be followed shortly by the publication of the medium-term fiscal plan.

I am happy to answer any questions members may have regarding my statement. I look forward to engaging with them.