Mick Barry (Cork North Central, Solidarity)
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28. To ask the Minister for Finance his views on the latest IMF World Economic Outlook forecasts and the implications for the fiscal position of the State; and if he will make a statement on the matter. [16228/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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The IMF’s World Economic Outlook (WEO) update signals a synchronised and deep contraction in global economic activity this year, with a gradual recovery next year. The WEO projects global GDP to contract by 4.9 per cent and world trade to shrink by nearly 12 per cent this year. For advanced economies, the position is more negative – GDP in both the euro area and UK is forecast to contract by over 10 per cent this year, while that in the US is projected to fall by 8.0 per cent.

There is no doubt that we are in the midst of a deep global recession and the WEO reflects 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, 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. 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.

This fiscal response is only possible because of the prudent policies implemented in recent years. This has allowed us to absorb the once-off increase in public indebtedness. Having said that, borrowing at this scale cannot go on indefinitely and, once circumstances allow, the debt-income ratio will have to be put on a credible downward path, most of which can be achieved through economic growth.