Written answers

Thursday, 26 January 2012

Department of Finance

Government Deficit

5:00 pm

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Question 74: To ask the Minister for Finance if he will define his interpretation of the term structural deficit and to state, in respect of the years 2008 to 2011, inclusive, his estimate of the structural deficit for Ireland; and if he will make a statement on the matter. [4660/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The term 'structural deficit' refers to the general government deficit adjusted for the economic cycle and one-off measures. It is the deficit that would prevail if transitory elements in the headline deficit owing to economic fluctuations and temporary / one-off factors (e.g. State injections into the banking system) were removed. The structural deficit provides greater clarity regarding the underlying fiscal position, though it is difficult to measure especially in a small open economy such as Ireland's, as the Fiscal Council acknowledged in its recent report. As such, there is considerable uncertainty surrounding all estimates of the structural deficit.

Budget 2012 provided an estimate of the structural deficit for last year. On the basis of a headline deficit of 10.1 per cent of GDP, and using the harmonised production function methodology developed jointly by the European Commission and Member States to identify the cyclical position of the economy, a structural deficit of 8.6 per cent of GDP was estimated for 2011. Using this same methodology and taking account of one-off measures in 2008, 2009 and 2010, my Department's estimates of the structural deficit for the years 2008-10 are set out in the table.

YearStructural deficit (% of GDP)
20086.7
20099.9
20109.9

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