Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The latest economic and fiscal projections from my Department were published yesterday, 14 November, in the updated medium-term fiscal statement, MTFS. Real GDP growth for 2013 is now estimated at 1.5%. This represents a one quarter of a percentage point downward revision on the previous forecast for 2013 as set out in the stability programme update in April. However, it is not simply a matter of suggesting that if growth forecasts are lowered, additional consolidation will be required to meet a deficit target; it is more complex than that. The achievement of fiscal targets is driven by a range of factors, including overall economic performance as well as specific developments that affect revenue and expenditure patterns in a given year. Positive base effects from a more positive outturn than was targeted for this year should also assist the position next year.

Broadly speaking, it is nominal rather than real GDP developments that drive revenue growth. Nominal GDP growth has been slightly above expectations this year. Although the nominal GDP growth estimate for 2013 has also been revised down by half a percentage point compared to the previous forecast from April, I believe the 7.5% of GDP deficit target for 2013 is still achievable based on the level of adjustment set out by the Government in late 2011 and reiterated in the MTFS yesterday.

The Government is firmly committed to meeting fiscal targets. We should remember that despite likely lower real GDP growth this year than was originally estimated in budget 2012 last December, we are on track to meet our fiscal targets this year. This is consistent with the outturn for last year when we also met fiscal targets despite GDP growth being somewhat lower than was originally estimated in budget 2011 in December 2010. It is worth bearing in mind that the European Commission's most recent forecasts, which were published last week, also predict our achieving the 7.5% of GDP deficit target next year. The Commission is forecasting real GDP growth of 1.1% for 2013.

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