John Halligan (Waterford, Independent)
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Question 40: To ask the Minister for Finance if the contraction in economic growth now taking place in Europe, and even in Germany, has likely consequences for his strategy on an export growth led recovery; and if he will make a statement on the matter. [9934/12]

Michael Noonan (Limerick City, Fine Gael)
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There is a huge amount of uncertainty at the moment, as evidenced by the wide range of GDP projections for this year, not just for Ireland, but also for the euro area. Obviously as a small open economy whose recovery is being driven by exports, we are affected by the slowdown in growth in Europe, though competitiveness improvements evidenced in recent years will provide some support. A weakening of activity in our main trading partners is already factored into the Department of Finance forecasts for economic growth that underpin the Budget. Given the highly uncertain environment, the Budget documentation pointed to a number of risks to this forecast – some to the downside and some to the upside. These risks are all still valid.

However, while the weak external outlook is of concern, there have also been some positive developments since Budget time, not least favourable exchange rate movements which will provide some benefit to the exporting sector. In addition, I would point out that some of the economic data – domestically and internationally – have not been as poor as some were assuming. For example, high frequency survey data show that economic activity and confidence in the euro area improved in January, while in Germany, the ZEW Indicator of Economic Sentiment showed a strong increase which raised the indicator to positive territory for the first time since May 2011. At home, new export orders are continuing to expand, with car sales also showing some improvement in January.