Finance | Irish economic performance in the context of the Eurozone and the overall European climate

QUESTION

To ask the Minister for Finance the extent to which positive conclusions can be drawn from this country’s economic performance when considered alongside other Eurozone countries and all other European countries; if the methodology for the measurement of the economy here continues to be robust and accurate; and if he will make a statement on the matter.

To ask the Minister for Finance the extent to which he remains satisfied that this economy continues to perform well when considered in the overall European context; and if he will make a statement on the matter.

REPLY

The economic performance across the EU and Ireland was somewhat subdued last year amid weak global trade and GDP growth. GDP grew by a modest 0.4 per cent in 2023 in both the euro area and EU, while Irish GDP recorded a contraction of 3.2 per cent. GDP growth in both the euro area and Ireland is projected to pick up this year, though remaining below historical growth rates. The European Commission is projecting euro area and Irish GDP growth of 0.8 per cent and 1.2 per cent respectively for this year.
There are no inaccuracies in the way that Irish GDP is calculated, and it is measured in the same way here as it is measured across all European countries under the European System of National Accounts. However, as is well documented, GDP is not a suitable measure to be used in assessing the living standards of Irish residents, and my Department has been pro-active in highlighting this. Indeed, last year is a perfect case in point, with measures of domestic economic activity, such as MDD, consumer spending and employment all showing growth, and GDP recording a decline. This is why my Department and many other institutions use measures such as modified GNI (GNI*) and MDD which strip out the main globalisation-related distortions from GDP.
My Department is forecasting MDD growth of 1.9 per cent for this year and 2.3 per cent next year. This is in line with European Commission projections of 1.7 per cent and 2.4 per cent MDD growth for 2024 and 2025 in its recently published spring forecasts.
There remains significant uncertainty surrounding the outlook for the international economy, however, and Ireland – which is highly integrated into the international economy – is facing many of the same headwinds as our European peers. Although inflation continues to ease, there remains the risk of renewed energy shocks adding to inflationary pressures. An escalation of geopolitical tensions would also have negative implications for both Irish and European economic growth.
However, the Irish economy remains on a relatively strong footing and continues to be competitive on the international stage. Ireland’s talented and flexible workforce and stable legal and regulatory landscape all contribute to our competitiveness in encouraging both indigenous and foreign investment. The stock of foreign direct investment in Ireland stood at almost €1.3 trillion in the fourth quarter of 2023.
I am conscious of the need to ensure the continued prosperity and competitiveness of the Irish economy, and will continue to closely monitor the risks to the international outlook.