Bernard Durkan (Kildare North, Fine Gael)
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25. To ask the Minister for Finance the extent to which provision has been made to ensure the stability and competitiveness of the economy notwithstanding the threat emanating from Brexit; and if he will make a statement on the matter. [9960/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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Improvements in Ireland’s competitiveness have been at the cornerstone of the recovery in the Irish economy. Since 2008, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 21 per cent.

The restoration of competitiveness has been hard-won through improvements in productivity, along with wage and price moderation. Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. For 2018 as a whole, the Harmonized Index of Consumer Prices averaged just 0.7 per cent. This subdued level of inflation has continued into 2019, with annual inflation of just 0.8 per cent recorded in January.

On the pay side, while average hourly earnings grew at just over 3 per cent in 2018, a noticeable increase on the growth rate of 1.7 per cent recorded in 2017, this came on the back of a near decade of low or negative growth in earnings. While gains in household incomes are welcome, particularly given the sacrifices made over the last decade, we need to avoid a significant acceleration in wages, given competitiveness considerations.

Despite the competitiveness gains made over the last number of years, the risks to our economy are numerous and primarily external in nature. First and foremost is the potential fallout from a more adverse-than-expected outcome from Brexit. Secondly, given Ireland’s position as a small open economy with a high degree of integration in global value chains, any further escalation in trade protectionism or a slowdown in global growth would have a disproportionate impact on the Irish economy. In addition, a faster-than-expected normalisation of monetary policy, changes in other jurisdictions that affect the competitiveness of Ireland’s corporate tax regime and rising geopolitical uncertainty all have the potential to undermine growth in the economy.

As many of the risks we are facing are external and thus beyond our control, the best way we can mitigate against them is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies, particularly those that increase productivity. Through the National Development Plan in particular, we are investing significantly to address the bottlenecks to growth which emerged during the recovery, such as the need for residential development and public infrastructure investment. This should ensure that our economy remains competitive and avoid the build-up of bottlenecks that could limit our growth potential.