Brian Lenihan Jnr (Dublin West, Fianna Fail)

Figures on economic growth are published by the Central Statistics Office on a quarterly basis, generally speaking one quarter in arrears. Data for the first quarter of this year will be published at the end of June or early July. The indicators available point to a softening in the economic conditions in the opening months of the year.

At budget time my Department forecast GDP growth of 3% for 2008, while pointing out a number of risks to this forecast. Those risks have materialised. The external environment has weakened. The short-term outlook for the US and UK has become less favourable while the growth rate of the euro area economy is expected to slow, albeit not to the same extent as in the US and the UK. At the same time, the appreciation of the euro against the dollar and sterling is becoming a cause for serious concern. Oil, food and other commodity prices have risen in recent months and the international financial market difficulties have been more prolonged than initially hoped.

Domestically, we are experiencing a sharp adjustment in the level of new house building and this is having a dampening impact upon the overall rate of economic growth. The range of the main economic forecasters spans from a low of 0.5% to a high of 3.5% for GDP for this year with the consensus for growth now approximately 2%. Compared with last December the current market consensus forecasts for this year and next have been revised downwards.

While my Department has not published revised forecasts the situation is being closely monitored. Clearly we are in a more challenging economic environment with several key indicators showing a slowdown. It must be emphasised that we face the slowdown from a position of strength and, once we take the appropriate steps to overcome the short-term difficulties, my Department expects the medium term outlook is for a pick-up to more sustainable rates of growth. It is of note that others, including the ESRI, share this assessment as evidenced by its recently published Medium Term Review: 2008-2015, in which it anticipates growth averaging 3.75% over the medium term.

How we respond to the short-term difficulties is important. To safeguard our growth prospects we need to improve our competitiveness, raise the level of exports and improve the productivity in the economy. Continued productive investment will also be important to help raise productivity and living standards and maintaining a low burden of taxation will also help stimulate private sector investment and participation in the labour force.

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