Brian Cowen (Laois-Offaly, Fianna Fail)

Last month in my budget, I indicated that the outlook is for a moderation in the rate of economic expansion this year. At the time, my Department forecast GDP and GNP to rise by 3% and 2.8%, respectively. These forecasts reflected the transition to a more sustainable level of output in the new housing sector and a more moderate rate of growth in some of our major trading partners was assumed.

In my budget, I indicated risks to this outlook, including a less benign international economic climate. However, the general consensus is that once these adverse influences begin to fade, the pace of economic growth in Ireland will return to our potential growth rate of between 4% and 4.5% because our medium-term prospects remain favourable and the economy's underlying fundamentals are strong.

For example, we have a dynamic and well-educated labour force, we have flexible markets that allow us to respond efficiently to adverse developments, we have a pro-business, outward-looking society, our public finances are sound, as indicated by the low level of public indebtedness, our unemployment rate is among the lowest in the euro area and our tax rates on capital and labour are low. Therefore, while there are risks to the economic outlook and overall sentiment has deteriorated in recent weeks, we are meeting these challenges from a position of relative strength.

Notwithstanding this assessment, policies are in place to help to improve our competitive position and enable us to absorb the impact of any deterioration in the global environment in a more efficient manner. In this context, my recent budget provided a significant stimulus, with current spending rising by 8% while revenues are projected to rise by approximately 3.5% this year. I announced an increase of approximately 12% in capital spending, confirming again that the implementation of the national development plan would be a key priority of the Government. The consensus approach to policy formulation through social partnership will help us to address any short-term economic slowdown by ensuring that all stakeholders in our economy have a shared sense of the emerging issues.

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