Brian Lenihan Jnr (Dublin West, Fianna Fail)

The challenging economic climate that has existed in Ireland and the broader international economy over the past three years or so has led to difficult trading conditions for many firms and significant job losses, most notably in the construction and retail sectors. This is in part due to the rebalancing of the Irish economy away from unsustainable growth dominated by construction in recent years. It should also be noted that, even during periods of sustained economic growth, there are always businesses closing and new businesses opening.

On a more positive note, after experiencing two years of significant falling output, it is now clear that growth returned during the latter part of last year and, for 2010 as a whole, GDP is expected to have stabilised. The strength of the corporate sector is also reflected in the performance of corporation tax receipts in 2010 which were marginally up on the 2009 level and almost a quarter greater than expected. The Government has been actively attempting to improve the business environment in Ireland and to foster the development of new and existing companies. Labour cost competitiveness has been improved as a result of the demonstration effect of the public service wage bill, the air travel tax has been cut, the commitment to retaining the 12.5% corporation tax rate has been reinforced and the business expansion scheme has been revamped.

Clearly, economic growth is essential if we are to have real improvements in living standards and get employment growing again. In this regard, growth will be achieved through an export-led recovery, driven initially by the mainly capital intensive manufacturing side but also by the more labour intensive services sector. As exports grow, domestic activity will gradually expand. Encouragingly, exports in the third quarter of 2010, as shown in the national accounts, grew by 12.9% for goods and 13.6% for services. Data released today by Bord Bia show that food and drink exports expanded by 11% in 2010 exemplifying the broad nature of the recovery. It is a recovery that is not confined to the multinational sector, but has taken place within indigenous exporting as well.

Indicators of activity, such as the Quarterly National Accounts and the Quarterly National Household Survey and soft data from sources such as the Purchasing Managers' Indices, indicate that economic growth patterns are in line with those contained in the budget. These indicators support my Department's forecasts that economic growth is expected to be 1.7% in GDP terms and 1% in GNP terms in 2011. My Department expects that this growth will be mainly driven by exports, with domestic activity continuing to contract, albeit at a much slower pace. The unemployment rate, which has shown signs of moderation in the final quarter of 2010, is expected to fall marginally to 13.2% this year.

The 2011 budget day growth forecasts take account of the impact of the consolidation in the public finances of €6 billion that was necessary to achieve a general Government deficit of 9.4% of GDP this year. In 2010, the Government stabilised the public finances and this year we will start to see the reduction in the deficit ratio, which is essential to meet the 2014 target.

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