Jan O'Sullivan (Limerick East, Labour)
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Question 81: To ask the Minister for Finance his views on the latest OECD economic outlook and its forecast that Irish GDP is set to decline 9.8% in 2009 with the budget deficit set to hit 11.5% of GDP; and if he will make a statement on the matter. [27969/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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With regard to the latest OECD Economic Outlook, released June 24th, I note that the OECD's projections indicate that the global contraction is slowing, and for the first time in a while they are more optimistic regarding a global upturn than their last outlook. Of particular importance to Ireland are the signs of impending recovery in the US.

I note that the OECD forecast that the Irish economy will contract by -93⁄4 per cent this year. Since the OECD forecasts were published, first quarter national accounts data have become available which show that GDP contracted by 81⁄2 per cent year-on-year in the first quarter. Moreover, many commentators are now of the view that the rate of deterioration may be slowing. Available data are consistent with this. Therefore, my Department's forecast of a 73⁄4 per cent contraction remains valid at this stage. Whatever the actual outturn, we all acknowledge that we are in a difficult economic situation and that Ireland is expected to suffer a 13% contraction in output over the period 2008-2010, before resuming some modest growth thereafter.

The OECD forecast a General Government Balance in 2009 of -11.5% of GDP and -13.6% of GDP in 2010; this compares to the Supplementary Budget forecast of -103⁄4% of GDP in both 2009 and 2010.

While the difference in the forecasts can partly be explained by the difference in economic growth forecasts, it also reflects the fact that the OECD forecast is based on existing specified policy. This means that they do not include the commitment contained in the Supplementary Budget to make further budgetary adjustments of the order of over 2% of GDP in 2010.

The recent Supplementary Budget set out a multi-annual consolidation plan for the public finances which will bring the General Government Balance to -3% of GDP by end-2013. I welcome the OECD's assessment that it is appropriate that fiscal consolidation has begun in Ireland given the severe pressures on the public finances.