Noonan warns of tough budget despite upbeat data
CSO figures show Ireland exited recession in second quarter as exports rose and spending picks up
Minister for Finance Michael Noonan has warned next month’s budget will be no easier despite new figures showing Ireland exited recession in the second quarter of this year.
Data from the Central Statistics Office today show gross domestic product rose 0.4 per cent over the three-month period. In the first quarter, GDP fell by 0.6 per cent. The growth in GDP was largely fuelled by a rise in exports and consumer spending.
While welcoming the figures, which will have a crucial bearing on his fiscal calculations, Mr Noonan said Budget 2014 was still going to be very difficult. He is due to deliver the budget on October 15th.
“There’s no reason to be throwing our hats in the air or anything like that,” he told reporters at the Department of Finance today.
“I suppose what comes from the figures is that the economy is out of recession. There’s modest growth, and taking that in association with the employment figures we had from the same time of the year, jobs are being created now at about 650 jobs a week,” he said. “So it’s moving in the right direction. What we have to do now is make sure we secure our exit from the programme so we must stabilise the growth and continue to grow.”
According to the CSO data, consumer spending rose 0.7 per cent on a seasonally adjusted basis, and net exports rose by 4.3 per cent - or more than €1.5 billion - compared with the first quarter of the year. Services exports rose by 3.6 per cent year-on-year in the second quarter.
Capital investment, meanwhile, fell by 3.4 per cent compared with the first three months of the year and Government spending was 1.3 per cent lower.
Year-on-year, GDP was down 1.2 per cent. Gross national product, which strips out the impact of multi-nationals, fell 0.4 per cent on the quarter and 0.1 per cent on the year.
Mr Noonan said the figures provided a solid foundation from which to cast the budget and to develop a fiscal strategy for the return to private market financing next year after the bailout ends.
He said the figures were more or less in line with expectations and said the Department of Finance would publish a revised set of forecasts in mid-October with the Budget to take account of the figures released today.
While Fine Gael is resisting Labour’s push to ease projected budget cuts to €2.5 billion from the €3.1 billion set out in Ireland’s bailout agreement with the troika, Mr Noonan declined to pinpoint the likely rate of retrenchment.
At the same time, he made a point of saying the return to growth meant the budget would be no more difficult than foreseen.
“I’ll put it to you this way, if it went the other way today that would be very bad news. It would make the budget far more difficult. But what we have now is a strong set of figures for the second quarter but it only takes us up to the end of June,” he said.
“I suppose the striking piece of news in the figures is that exports are at an all-time high both in value and in volume terms. So we can build on it.
“Now the economy has returned to growth, it gives us hope that we can sustain the of pace of job creation and it gives us very strong hope that as we exit the programme, we’ll have a growing economy with lots of additional people going back to work.”
Meanwhile, Minister for Health James Reilly said the figures were “great news” for the economy. “It continues to recover and that is great news for the Government,” he said. “Health played its part. We took €3 billion in real terms out of our budget which is nearly 20 per cent. We’ve had nearly 10 per cent reduction in staff,” he said.
He said health is very different from many other departments.
“We have demographic pressures,” he said. “We’re going to work hard in health. I’ve made it clear to the HSE and the Department that we have to meet our budget. All the stops will have to be pulled out.
Asked if the figures mean next month’s budget will be less severe, Dr Reilly said: “I think this budget is going to be tough, as the Taoiseach said, no matter what way we go at it. But I hope and I believe it’s the last of the really tough budgets and the country can look now to a much brighter future.
“I think we’ve done extraordinarily well as a people over the last two and a half years. I don’t just compliment the Government on that I compliment the people of Ireland who have borne the strain, who have worked really hard.
“I would like to think that in the budget there might be some little things in there that help those who have found it particularly difficult - parents of young families paying mortgages, people who have seen their income hit in so many different ways. But we are getting this country back on its feet and this time around everybody who shared the pain will share the gain - not just the elite few before.”
Ireland is seeking this year to become the first country to exit a bailout since the euro-region crisis began.
The Department of Finance said on September 10th there may be “some downside potential” to its forecast for 1.3 per cent economic growth for the full year.