Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance if he will provide an explanation for the difference between the forecast contraction of gross national product by the Central Bank of Ireland produced in October 2012 for the full year 2012 of 0.4% and the forecast in the medium term fiscal statement produced by his Department in November 2012 which forecast real GNP growing at 1.4% in 2012. [55772/12]

Michael Noonan (Limerick City, Fine Gael)
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My Department’s latest forecasts are set out in the Economic and Fiscal Outlook which accompanied the Budget and which was based on the Medium Term Fiscal Statement (MTFS) published on 24th November. My Department is projecting real GNP growth of 1.4 per cent for this year. This projection is based inter alia on data for the first half of the year which show annual GNP growth of 2¼ per cent relative to the first half of the previous year.

The projection for GNP is in excess of that projected for GDP (0.9 per cent). As the Deputy will be aware, GNP equals GDP less net factor income from the rest of the world, the latter mainly relating to profit repatriation by multinational corporations. Net factor outflows recorded a sharp fall in the second quarter of 2012 boosting GNP growth relative to GDP. This development is also likely to contribute to a further improvement in the current account of the balance of payments, which is expected to record a surplus equivalent to 3.4 per cent of GDP this year.

I would stress that net factor income flows are very volatile on a quarterly basis as they can be heavily influenced by specific decisions made by individual firms which cannot be predicted with much certainty. In this context, the MTFS stresses that there is a wide degree of uncertainty around GNP growth and level forecasts both in the short- and medium-term.