Written answers

Wednesday, 3 December 2014

Department of Finance

Economic Competitiveness

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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54. To ask the Minister for Finance the extent to which this economy remains competitive in the context of all others throughout the EU both within and without the eurozone; and if he will make a statement on the matter. [46519/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Substantial progress has been made in terms of improving Ireland's competitiveness in recent years.  

There has been a significant improvement in economy-wide cost competitiveness. The European Commission in its autumn forecasts estimate that real unit labour costs in Ireland will fall by 4.3 per cent annually in 2014 which is the largest decline across all EU Member States and compares with a fall of 1.2 per cent in the UK, and increases of 0.1 per cent in the EU, 0.2 per cent in the US and 0.3 per cent in the euro over the same time period. Competitiveness has been achieved through wage moderation vis-a-vis trading partners as well as productivity improvements.

The real Harmonised Competitiveness Indicator (HCI) is a measure of the trade-weighted exchange rate for Ireland, adjusted for relative price developments. In October 2014, Ireland's real HCI fell by 3.9 per cent year on year.  A fall indicates an improvement in price competitiveness and leaves Irish-based firms better equipped to compete on the international market.

Relatively low consumer price inflation over the last five years has meant that Irish price levels have fallen considerably relative to our euro area peers. For instance, annual HICP inflation in Ireland has been below that of the euro area average for every year since 2009. Despite continued low levels of HICP inflation in Ireland, the rate has now been at or above the euro are rate for several months. Developments in this regard will require ongoing monitoring to ensure that hard-won competitiveness gains are not lost in the years to come.

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