Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The economy recorded GDP growth of 0.2 per cent in 2013.  Most recently, first estimates of economic activity for the second quarter 2014 show GDP growing by 1.5 per cent over the quarter and by 7.7 per cent year-on-year in the second quarter.  Taken in conjunction with data for quarter one, GDP grew by 5.8 per cent in the first half of this year.  The increase in economic activity is broadly-based with both domestic sectors and exporting sectors performing strongly.

Key macroeconomic components over the last five years are set out in the table.

Annual % change	2009	2010	2011	2012	2013
Real GDP	-6.4	-0.3	2.8	-0.3	0.2
Real GNP	-9.0	1.7	-0.9	2.0	3.3
Private consumption	-5.4	0.9	-1.2	-1.2	-0.8
Government consumption	-3.5	-7.1	-2.1	-2.1	1.4
Investment	-20.5	-18.0	-2.9	5.0	-2.4
Exports	-4.0	6.2	5.5	4.7	1.1
Imports	-9.2	3.0	-0.6	6.9	0.6

Source: Central Statistics Office

Domestic activity contracted sharply following the collapse of the property market, with domestic demand decreasing significantly between 2008 and 2012. This had a severe effect on the labour market with the unemployment rate increasing by around 10 percentage points over this period.

However, recent indications have been that domestic demand is stabilising and is moving on to a modest recovery path. Personal consumption was up by 1.9 per cent in the second quarter of this year (year-on-year) and healthy retail sales so far this year, along with improving consumer sentiment, bode well for the second half of this year. There has also been a return to growth in 'core' (excluding aeroplanes) investment, with both construction and machinery and equipment growing in recent quarters.

Perhaps the most significant development is that employment has now increased in each of the last seven quarters, with employment up 1.7 per cent year-on-year in the second quarter.  Employment has now increased by over 70,000 since the low-point in mid-2012. In line with this, the standardised unemployment rate stood at 11.2 per cent in August, having fallen from a peak of 15.1 per cent in February 2012.  While I would stress that more must be done to tackle the still high level of unemployment, it is clear that we are moving in the right direction.

Quarterly data show that exports rose by 13 per cent in the year to the second quarter of 2014.  This was the fastest rate of expansion since 2001 and there is growing evidence that the impact of the patent expiry issue in the pharmaceutical sector has passed. 

These encouraging macroeconomic data are mirrored in the revenue receipts which are 8.7 per cent higher in the period January to August 2014 than for the same period last year.

Through the fiscal adjustment measures that the Government has implemented since 2011, stability has been restored to the public finances.  Having met and exceeded all of our deficit targets to date, we remain on track to bring our deficit below 3 per cent of GDP in 2015.  In addition, the debt-to-GDP ratio is estimated to have peaked and is now on a firm downward trajectory.

My Department will publish updated macroeconomic forecasts with the Budget next month.  It is expected that the pace of economic growth with accelerate this year. The contribution from domestic demand is expected to strengthen, which is encouraging.  On the assumption of a pick-up in trading partner growth, exports are set to increase once again.