Bernard Durkan (Kildare North, Fine Gael)
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103. To ask the Minister for Finance the extent to which the economy continues to remain competitive when compared to other competing jurisdictions within the European Union and without; and if he will make a statement on the matter. [23086/16]

Michael Noonan (Limerick City, Fine Gael)
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Significant progress has been made in improving Ireland's competitiveness in recent years. The latest figures from Eurostat estimated that nominal unit labour costs (a widely used measure of competitiveness internationally) in Ireland declined by 4.2 per cent annually in 2015, the largest decline across all EU Member States for which data are available.   

The decline in unit labour costs in 2015 is a continuation of the trend of substantial improvement in Ireland's economy-wide cost competitiveness since 2008 (the peak year for unit labour costs in Ireland). It is estimated that nominal unit labour costs in Ireland fell by 20 per cent between 2008 and 2015. This compares with increases of 9 per cent in the UK, in the euro area and in the European Union as a whole, over the same period.

Following the crisis, Ireland's relative competitiveness as measured by the real harmonised competitiveness index has continued to improve as a result of reductions in relative prices together with favourable exchange rate movements. In addition, relatively low consumer price inflation in recent years has contributed to the improvement in Ireland's competitiveness as Irish price levels have fallen considerably relative to those of our euro area peers. For instance, annual HICP inflation in Ireland has been below or equal that of the euro area every year since 2008.

Nevertheless, as a small regional economy in a single currency zone, Ireland is vulnerable to losses of competitiveness. The UK's vote to leave the European Union has caused some volatility in the currency market. Challenges for Irish exporters would arise should there be a prolonged period during which the sterling rate was low against the euro.

The gains in Irish competitiveness achieved since 2008 have been hard-won through productivity improvements and wage and price moderation. It is important that this competitiveness is preserved and continues to support growth and the improvement in real living standards. In this regard we must be cognisant that favourable exchange rate movements can reverse, as can be seen for example in the recent strengthening of the euro against sterling. Similarly, gains from the fall in oil prices may unwind in the future. This highlights the importance of maintaining competitiveness-oriented policies to help address emerging uncertainties.