Bernard Durkan (Kildare North, Fine Gael)
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58. To ask the Minister for Finance if he is satisfied regarding the performance of all aspects of the economy in the post bailout period; his plans for corrective measures; and if he will make a statement on the matter. [46523/14]

Bernard Durkan (Kildare North, Fine Gael)
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59. To ask the Minister for Finance the extent to which basic economic fundamental targets continue to be met throughout the post bailout period; if particular issues have arisen in this regard; and if he will make a statement on the matter. [46524/14]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 58 and 59 together.

This Government's principal strategy for economic and budgetary policy has been to put the economy and the public finances on a more stable footing.  Following the successful conclusion of the EU-IMF programme, the Irish economy has emerged from the crisis and there are clears signs that the economic recovery is well established.

First, estimates of economic activity for the second quarter of this year were very strong and were well ahead of consensus expectations, with GDP growing by 1.5 per cent over the quarter and by 7.7 per cent year-on-year. Taken in conjunction with first quarter data, 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.

Exports rose by 13 per cent in the year to the second quarter of this year.  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.

On the domestic front, personal consumption was up by 1.8 per cent year-on-year in the second quarter and investment increased by 18.5 per cent.   Consumer spending has been strong in the first eight months of the year.  Retail sales in the period January to October were up 6 per cent when compared with the same period in 2013.  Core sales (excluding motor trades) were up almost 4 per cent over the same period.  Investment in building and construction as well as in machinery and equipment spending are on a rising path. 

Recovery is perhaps most clearly evident in the labour market with employment increasing in each of the last seven quarters. The total number of jobs has increased by over 80,000 jobs since the low-point in mid-2012.  In line with this, the standardised unemployment rate has fallen from a peak of 15.1 per cent in early 2012 to 10.9 per cent in October.  

My Department is forecasting full-year GDP growth of 4.7 per cent this year. This is being driven by strong growth in exports, but domestic demand indicators such as industrial production and retail sales are also in positive territory. This recovery has manifested itself in tax revenues which are expected to come in €1 billion (or 2.5 per cent) above original expectations.

Over the medium term, my Department is forecasting average annual GDP growth of just over 3 per cent in the 2015-2018 period. This is driven by a positive contribution from net exports on the back of economic growth in Ireland's trading partners.  Domestic demand is set to contribute to growth as well, with growing employment and rising household incomes resulting in an increase in private consumption. 

Notwithstanding the current improvement, risks to the outlook remain for Ireland.  These relate to the low inflation observed in many advanced economics as well as geo-political tensions and the underperformance of the euro area economy. As highlighted in the material accompanying Budget 2015,  the phenomenon of contracted production has boosted GDP in the first half of this year. It complicates the task of forecasting net exports at this juncture and, by extension, GDP.

In terms of the public finances, policy measures implemented by the Government have resulted in a decline in the deficit in recent years.  This decline has been in a phased manner, consistent with the dual needs of supporting domestic activity as well as repairing the public finances.  All of Ireland's interim deficit ceilings under the Excessive Deficit Procedure have been met and Ireland is firmly on track to achieve a deficit of below 3 per cent in 2015.  This has been important in restoring Ireland's credibility in the international markets - bond yields have fallen substantially since the high rates of mid-2011.  The debt ratio has peaked and is now on a downward path.  After 2015, fiscal policy will be set in line with the requirement to move towards Ireland's medium-term budgetary objective, which is for a balanced budget in structural terms.

The macroeconomic and fiscal framework underpinning Budget 2015 was more favourable than anticipated. This was as a result of positive economic developments over the summer, an increase in tax revenues compared to profile as well as a reduction in national debt interest costs.  This allowed the introduction of a package of income tax reductions and expenditure increases amounting to €1,050 million in Budget 2015, or about 0.5 per cent of GDP.  This package is likely to have a positive short-run impact on aggregate demand in the economy compared to an alternative of no policy change. It is estimated that the Budget package will add 0.3 per cent to real GDP in 2015 and an additional 0.2 percentage points to employment growth.