Written answers

Wednesday, 5 April 2017

Department of Finance

Economic Competitiveness

Photo of Tony McLoughlinTony McLoughlin (Sligo-Leitrim, Fine Gael)
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126. To ask the Minister for Finance the extent to which the economy remains competitive in view of Brexit and the triggering of Article 50; and if he will make a statement on the matter. [16929/17]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Significant progress has been made in recent years in improving Ireland's competitiveness.  The latest figures from the Central Bank of Ireland, show that Ireland's real harmonised competitiveness indicator (a widely used measure of competitiveness in Europe) has improved by over 20 per cent between its peak in 2008 and February 2017. This improvement has occurred notwithstanding the substantial appreciation of euro against sterling in the second half of last year, following the UK's vote to leave the EU last June.

The gains in Irish competitiveness 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.  This is all the more important given the risks posed by Brexit.

We must be cognisant that favourable exchange rate movements can reverse, as can be seen for example in the strengthening of the euro against sterling last year. Similarly, gains from the fall in oil prices may unwind in the future. Indeed, the drag on consumer prices from low oil prices is already beginning to ease. In addition, excessive rent and house price growth are also a potential threat to competitiveness.

These risks highlight the importance of maintaining competitiveness oriented policies, including sustainable fiscal policies, to help address emerging uncertainties. It is also important that at firm level, pay moves in line with productivity developments.

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