Written answers

Thursday, 16 July 2020

Department of Finance

Economic Competitiveness

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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78. To ask the Minister for Finance the degree to which he expects the economy here to retain or increase its competitiveness on European or world markets; and if he will make a statement on the matter. [16451/20]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Irish economy experienced strong growth prior to the outbreak of COVID-19, with GDP up 5.5 per cent in year-on-year terms in 2019, with exports making a strong contribution to this.

The strength of our economy prior to the onset of COVID-19, in part, reflects the important steps we have taken to improve our competitiveness. The 2019 IMD World Competitiveness Yearbook recently ranked Ireland as the 2nd most competitive country in the EU and the 7th most competitive country in the world. In addition, since 2008, the Central Bank’s real harmonised competitiveness indicator had improved by approximately 25 per cent.

Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. In 2019, average annual inflation was just 0.9 per cent. Inflation is forecasted to fall by 0.6 per cent in 2020 due to the outbreak of COVID-19 and is expected to only grow by 0.4 per cent in 2021.

On wage developments, prior to COVID-19, average annual earnings increased by 3.6 per cent year-on-year in 2019. The current pandemic has shifted the focus from monitoring a potential acceleration in wages that could undermine Ireland’s competitiveness to ensuring household incomes are supported.

The outbreak of COVID-19 has caused adverse impacts, in particular on the labour market. However, there are no signs of a loss of competitiveness on international markets thus far. Trade has performed relatively well with the highest monthly level of exports and a record trade surplus recorded in March, caused by a boost in pharma exports. Another major exporting sector, computer services, recorded strong growth in Q1 2020 and is expected to perform well despite the outbreak of COVID-19.

The recovery of the Irish economy is still uncertain, with numerous scenarios still possible. The National Economic Plan, which is due to be published alongside Budget 2021, will demonstrate the Government’s commitment to bringing Ireland out of the worst of this economic downturn. Maintaining competitiveness will be an important part of this.

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