Finance | Stability of the Economy and fiscal policy
To ask the Minister for Finance the extent to which good governance and fiscal policy continue to remain central to combatting inflation and maintaining a stable economy; and if he will make a statement on the matter.
Putin’s illegal and immoral invasion of Ukraine and the weaponisation of gas supplies has triggered an exceptionally large energy price shock which has reverberated throughout the globe. Consumer price (HICP) inflation has picked up sharply as a result and stood at 9.6 per cent in October. Almost every advanced country in the world is in the same position, with euro area inflation reaching a record 10.7 per cent in October.
My Department expects inflation to peak in the fourth quarter of this year and average 8½ per cent for the year as a whole. For next year, inflation is only expected to ease slightly to just over 7 per cent. Practically speaking, inflation will be higher for longer and this will have a real impact on households and businesses.
Inflation is eroding real incomes of Irish households while tighter financing conditions and heightened economic uncertainty is constraining businesses investment. As a result, the pace of growth in the domestic economy is expected to slow throughout the rest of this year and into next year.
The Government is acutely aware of the cost pressures households and businesses face and that is why we have focused on doing as much as possible to provide relief to households and firms without making the inflationary situation worse through inappropriate or poorly targeted fiscal policy. That is exactly what we have achieved in Budget 2023.
Budget 2023 includes a total package of €11 billion, of which €4.1 billion has been set aside for once-off cost of living supports. Importantly, the range of measures set out in Budget 2023 have been designed in a manner which balances the need to provide much needed support to households and businesses on the one hand, whilst at the same time avoiding a situation in which the Government’s fiscal response becomes part of the inflationary problem. This prudent approach to our public finances ensures that spending is both sufficient and sustainable, meeting the needs of today without compromising the future needs of our people in the years to come.
Leave a Reply