Written answers

Thursday, 4 July 2024

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

255. To ask the Minister for Finance the degree to which he expects our economic forecast to be affected by international developments; and if he will make a statement on the matter. [29084/24]

Photo of Jack ChambersJack Chambers (Dublin West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

The domestic economy displayed solid growth in the first quarter of this year. Modified domestic demand (MDD) – my preferred measure of domestic activity – increased by 1.4 per cent in the first quarter. Irish exports appear to have turned a corner, growing by 7 per cent in the first quarter of 2024. This represents the first quarter of positive export growth in five quarters.

Looking ahead, my Department is forecasting MDD growth of 1.9 per cent for this year, supported by strong consumer spending. Exports are projected to grow by 2.8 per cent in 2024, reflecting a pick-up in goods exports produced in Ireland and continued growth in services exports.

Notwithstanding the positive performance in the first quarter of this year, there of course remains uncertainty surrounding the growth outlook. Risks to the outlook are two-sided in nature, however, developments in the global economy remain a key source of risk to the Irish growth outlook. My Department’s forecasts already incorporate the low-growth international environment. The outlook for the global economy has improved modestly since these forecasts were published in April, however risks to the external environment remain.

Although inflation appears to be on a downward trajectory in most economies, higher than expected inflation would have negative implications for economic activity, and could also result in interest rates remaining higher for longer. Further heightening of geopolitical tensions or more adverse demand conditions would also have negative implications for Ireland. The highly concentrated nature of the multinational sector makes the economy vulnerable to sector-specific shocks. On the upside, however, there is the potential for a faster decline in inflation or faster interest rate cuts than is currently anticipated.

As a small, open economy, Ireland is of course particularly vulnerable to external risks. However, the economy is on strong footing to face any potential headwinds. My Department will continue to monitor the risks to the Irish economy in the year ahead. Updated macroeconomic forecasts will be published by my Department in the autumn.


No comments

Log in or join to post a public comment.