John Lahart (Dublin South West, Fianna Fail)
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52. To ask the Minister for Finance the action he is taking to maintain Ireland’s economic competitiveness; and if he will make a statement on the matter. [9494/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland’s economic recovery has been remarkable. The most recent data for modified domestic demand – the best measure of domestic economic activity – showed continued growth, with domestic activity surpassing its pre-pandemic level. Whilst the domestic economy is rapidly bouncing back, external trade has bolstered the Irish economy throughout the crisis.

The exports of the multinational sector in Ireland proved highly resilient during the pandemic, and MNCs supported the Irish economy via employment and taxes. Importantly this growth is now becoming more broadly balanced with the indigenous traded sector rebounding strongly last year.

I am very conscious of the contribution Ireland’s exports make to the economy, and the need to maintain our competitive advantage on the international stage. The Irish modified current account, which strips out the distorting effects of globalisation, is also in a very strong position and is expected to remain in surplus over the medium term.

The strong recovery in the economy has helped drive the recovery in the labour market, with 2.5 million now in employment and the Covid-19 adjusted unemployment rate falling from a peak of 31.5 per cent in April 2020 to 7.8 per cent in January 2022.

Against this positive economic backdrop we cannot become complacent and we must remain cognisant of the challenges to our competitiveness both now and into the future. As the economy approaches full employment, wage pressures are likely to emerge which could in turn feed through to persistent inflationary pressure. Indeed, shortages are already emerging in certain sectors.

Looking to the future, the international outlook remains a source of continued uncertainty and I am acutely aware of the risks this poses. There is expected to be a negative implication for Irish trade once the UK fully implements the trade provisions of the Trade and Cooperation Agreement. The Government continues to engage with the EU and the UK to minimise the disruption created by Brexit, and a great deal has been done to ensure Irish businesses are adequately prepared for its still unfolding effects.

Beyond Brexit, Ireland, as a small open economy, remains particularly exposed to global risks, including the worsening epidemiological situation, persistent supply side bottlenecks, energy price shocks, global inflationary pressure and rising geopolitical tension. My Department will continue to monitor the risks to Ireland’s competitiveness closely, and this Government will respond to them as required to protect and promote the Irish economy.