There are signs of a “very strong rebound” in the economy, Paschal Donohoe said as forecasts for economic growth this year were revised upwards.
The Minister for Finance said the economy is to grow by 5.75 per cent this year and an estimated 6 per cent next year following excess savings amounting to €15 billion.
The summary of the macroeconomic projections have been backed by the Irish Fiscal Advisory Council ahead of Budget 2022, which is to be announced in a fortnight.
The Department of Finance said the key development in the growth since the spring projections is the high number of people who are vaccinated, as the State has the highest vaccination rates in the EU.
The amount of savings accumulated in the last 18 months now stands at just over €15 billion.
Ministers @mmcgrathtd and @Paschald are briefing the media today following the endorsement of the Government's updated economic forecasts by IFAC. #Budget2022 @IRLDeptFinance pic.twitter.com/OtBgtDTRFU
— Department of Public Expenditure & Reform (@IRLDeptPER) September 30, 2021
However, not all of that is expected to feed into consumer spending.
“The indicators that we track regarding the performance of our economy are where we are with modified domestic demand and what is driving that modified domestic demand,” Mr Donohoe added.
“That modified domestic demand is pointing to growth in our economy of just over 5 per cent for this year, and growth next year of just over 6 per cent.
“This shows a domestic economy which rebounded in a strong way.
“The key driver behind that growth in the domestic economy is what is happening now with consumption, which in turn is being enabled by the high level of savings within our economy and a safe reopening of our economy.”
He said the performance of the economy shows the Government’s economic supports, including the Pandemic Unemployment Payment (PUP) and the Employment Wage Subsidy Scheme (EWSS), are contributing to the rebound.
The Minister said it is also making a difference to the predicted employment levels.
“It’s only earlier on this year we were in a situation where we were seeing the PUP and the number of people on the PUP again reach a level of half a million of our fellow citizens,” Mr Donohoe added.
“We are now at a point in which the changes within our economy, the impact of policies, the impact of the vaccination programme, means that the number of people on the PUP is now approaching 100,000.
“To be absolutely clear that is still 100,000 too many. The Government, through our pathways to work, through the impact of our stimulus plan, is committed to getting back every job that we lost during the era of the pandemic.
“For the progress that is being made in helping our country go back to work is, out of all of the different indicators that we have, really the most important one, in terms of what it means for living standards and what it means for the citizens.”
Looking ahead to next year’s budget, Mr Donohoe said its perimeters are as laid out in the Summer Economic Statement, however, the Minister for Public Expenditure, Michael McGrath said the Government is forecasting a lower level of unemployment of 1 per cent in 2022 than was set out in the statement earlier this year.
“That means more people at work, and less people unemployed, thanks to the recovery that is now well under way,” Mr McGrath added.
“On the expenditure side of things, the ceiling for next year is €88.2 billion. It is worth highlighting that is about €2.5 billion less than the ceiling in 2021.”
