The Government yesterday published its Medium-Term Economic Strategy. It said that while economic recovery is underway, it is clear that the financial crisis will cast a long shadow. Legacy effects – such as high levels of indebtedness (household, corporate and public) and unemployment – will take time to work through and risks to both domestic and international demand make medium-term projections subject to a high level of uncertainty. <p>

Nevertheless, there are good reasons to be confident that the growth potential of the Irish economy remains strong. Ireland continues to be an attractive location for investment, and the labour force is relatively young, flexible and well-educated. The primary economic goal of the Government is to improve employment levels and household incomes, in a manner that is consistent with maintaining competitiveness and the stability of the public finances. <p>

Between now and 2020, the Irish economy is expected to grow, leading to more jobs and increases in living standards. The Department of Finance projects that the growth potential of the Irish economy is in the region of 3.0% per annum over the medium-term, with broadly equal contributions from employment and labour productivity. As a result, unemployment is expected to decline from an expected average of 13.5% this year to 8.1% in 2020. <p>

The Government’s strategy aims to return the public finances to balance in both headline and structural terms by 2018. Once Ireland achieves its budget target in 2015 of a deficit below 3.0% of GDP, the application of continued budgetary rigour – combined with the positive impact of expected economic growth – will lead to reductions in the Government deficit and public debt consistent with the requirements of domestic and fiscal rules, without necessarily requiring further austerity measures. <b>By 2020, the debt/GDP ratio is expected to fall to just over 90%, close to the current Eurozone average. <p>

<p><h5>Alan McQuaid</h5>


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