Mick Barry (Cork North Central, Solidarity)
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12. To ask the Minister for Finance his views on the latest European Commission forecast for economic growth and the implications for the fiscal position of the State; and if he will make a statement on the matter. [16229/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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The European Commission’s summer economic forecasts signals a deep contraction in European economic activity this year, with a gradual recovery next year. EU GDP is projected to shrink by around 8¼ per cent, while global GDP (excluding the EU) is expected to contract by 3.9 per cent this year.

There is no doubt that we are in the midst of a deep global recession and the Commission's forecasts reflect this. In response, policy support has been scaled-up in most countries, on both the monetary and fiscal fronts. While very high frequency data suggest that the low-point has been passed and that a gradual recovery is setting in as restrictions ease, the level of uncertainty regarding the path for the global economy is exceptionally high, not least because of the uncertain path of the virus.

From an Irish perspective, the Commission expects real GDP to contract by 8½ per cent this year, with growth of 6¼ per cent next year. My Department set out its spring forecasts in the Stability Programme Update which was published in April. GDP is projected to contract by 10.5 per cent this year, with a partial recovery expected next year.

In response, the Government has allowed a large deficit to open - the operation of the so-called automatic stabilisers - and supplemented this with significant discretionary policies designed to boost healthcare capacity, support household incomes and maximise the firm survival rate.

A general government deficit of between €23 and €30 billion is in prospect for the year. The scale and scope of the Government's response has been in line with that of other European countries; indeed, the Government will bring forward additional measures shortly.

It is entirely appropriate that Government runs a deficit to support the economy in these unprecedented circumstances. However, borrowing at this scale cannot go on indefinitely and, once circumstances allow, we will need to bring public expenditure and revenue back into balance. This can be achieved through economic recovery (which automatically boosts tax receipts as people spend more, etc.) and re-normalising public expenditure.