Politicians on the Dáil’s public spending watchdog are set to be warned that the economic situation will “worsen” in the coming months.
The secretary general of the Department of Finance, John Hogan, is expected to tell Thursday’s meeting of the Public Accounts Committee (PAC) that Ireland is “better placed than most” but is “not immune” from global trends.
He is to be quizzed by committee members on the exchequer financial outturn for 2021; the €45.7 billion net cost of the Irish banks bailout; and the Ireland Apple escrow fund.
In his opening statement to the PAC, Mr Hogan will say that the worst economic impacts of the pandemic receded earlier this year but “the optimism that accompanied it was quickly tempered by the fallout from the invasion of Ukraine.”
He also says: “The energy crisis precipitated by the war has led to an inflationary environment not seen in decades” and that “as prices rise, the Government has sought to protect the most vulnerable.”
Mr Hogan says his Department is “at the forefront of these efforts” and will highlight how tax measures in Budget 2023 are aimed at protecting people’s incomes and alleviating “some of the pressures individuals, families and businesses are facing”.
He will tell TDs that the global economic environment has “worsened considerably” since he last appeared at the PAC and “rising energy prices have translated into higher prices for food, clothing and basic services across the world”.
Mr Hogan adds: “Reduced real incomes, falling consumption and a slowdown in investment will likely lead to recessions in some of our key trading partners.
“Although better placed than most, Ireland is not immune to these global trends.”
He will outline how the Department has revised down the forecast for Modified Domestic Demand (MDD) – which he describes as “the best measure of domestic economic conditions” – by 2.7 percentage points, to just 1.2 per cent in 2023.
The committee will also be told that inflation is estimated to average just over 7 per cent next year and 2.4 per cent in 2024 and this is “considerably higher than in recent years”.
TDs will hear how the European Central Bank has been “forced to respond” and has raised interest rates which will lead to “higher borrowing costs for individuals and businesses, dampening consumption and potentially leading to less investment across the economy”.
Mr Hogan adds: “In summary, the economic situation will worsen over the short to medium term.”
He will tell TDs: “In such uncertain times, the core mission of the Department – which is to lead in the achievement of the Government’s economic, fiscal and financial policy goals – is critically important.”
