The Minister for Finance Paschal Donohoe has said he is “optimistic and positive” the Irish economy will navigate its way through the current economic challenge and will not go into recession. Speaking in Washington where he is attending the annual meetings of the International Monetary Fund (IMF), he forecast that growth in the economy next year would be “lower than we would have wanted or expected” at about 1.5 per cent.
Mr Donohoe told The Irish Times: “For now most likely scenario is low economic growth as opposed to no economic growth or recession. But all that being said, things can change, new risks can develop [and] that is why it was important to take a cautious approach in our budget in putting in place supports that are more targeted than earlier in the year and putting [them] in place on an exceptional and one-off basis.”
On Wednesday IMF managing director Kristalina Georgieva said that across many economies the risks of recession were rising “and even when growth is positive, for many people it will feel like a recession because of rising prices and shrinking real incomes”.
She urged countries to bring down inflation and to introduce policy measures that were temporary and well-targeted. “Steer away from across-the-board fiscal support that is neither effective nor affordable.”
[ Most chief executives in Ireland expect economy to avoid recessionOpens in new window ]
Mr Donohoe accepted that the Government had introduced some universal supports but maintained that they were capped, such as the €200 per household per bill in relation to energy costs.
He said he believed the approach to date of the European Central Bank on interest rates had been appropriate to the Irish economy.
He said in his engagements with the IMF he had stressed that the Government’s spending plans were funded, not financed by borrowings, and that it had placed €6 billion in a national reserve to manage future risks.
Mr Donohoe said that on Friday Eurogroup ministers would hold talks with the US treasury secretary Janet Yellen. He forecast the meeting would centre on efforts “to recommit ourselves to how to guide the global economy through a period of real turbulence”.
Asked about his future as president of the Eurogroup after an expected Government reshuffle later this year when Leo Varadkar returns to the Taoiseach’s office, Mr Donohoe said he was “leaving it up to the party leaders [in the Coalition] to determine what role I play in the future”.
He also said he would be working with the leaders of Fianna Fáil, Fine Gael and the Green Party on clarifications in relation to the application of the controversial concrete block levy announced in the budget last month.
“I will be completing work on this on my return to Dublin, in recognising some important matters have been raised, particularly by the construction sector, but I also have to make the case for the fact [that] if we are going to undertake needed and justified commitments of €2.7 billion to rebuild homes ruined by mica we have to find a way of paying for it.
“I will be working with the party leaders on this in the coming days, and we will look to further clarify how it will be applied in the Finance Bill.”
He said any measure would be “consistent to what I announced” in the budget.
Mr Donohoe said he had been “humbled” to hear from his Ukrainian counterpart over recent days about the financial situation of his country following the Russian invasion.
Mr Donohoe said the first conference on the reconstruction of Ukraine would take place in Berlin. He said while consideration should be given to the role seized Russian assets could play, the vast majority of rebuilding was going to be funded by contributions by individual governments and loans which they were prepared to underpin.
