Tuesday, 21 February 2012
Department of Finance
The Budget forecast is for real GDP growth of 1.3 per cent in 2012. Given the highly uncertain environment, the Budget documentation also pointed to a number of risks to this forecast – some to the downside and some to the upside. These risks are all still valid. The Budget forecast was prepared on the basis of economic information (domestic and international) available up to end-November 2011, and was mid-range at that time. There have been a number of developments since then – some negative, but some positive. Obviously, the euro-area sovereign debt crisis and the possibility of a more prolonged global slowdown are of concern. On the other hand, recent exchange rate developments will benefit the exporting sector, while what looks to be a more benign path for ECB interest rates will help households.
At this stage of the year, there is very little actual economic data relating to 2012. Of the domestic and international data that are available, some of these have not been as poor as some were assuming. In addition, we have seen concerted policy action at European level and I am confident that this will help restore confidence in the euro area.
As more information becomes available over the coming months, my Department will take it on board and, as is the norm, will present updated economic forecasts in the April Stability Programme Update.