The slowdown in the economy, although sharp, may not be as severe as feared by some commentators. As a result, the Minister for Finance, Mr McCreevy, could have more room for manoeuvre in relation to capital spending in 2002 than was apparent even two weeks ago when he published the Government's estimates.
Figures released yesterday showed that, in advance of the repatriation of profits by multinational firms and other factors, the economy grew by 9.2 per cent of GDP in the second quarter of this year, following growth of 12.7 per cent in the first three months. At the same time, the balance of trade remains firmly in the black. And, on the basis of figures for the first nine months, the largest trade surplus ever recorded is likely to emerge in 2001.
The number of people at work and generating wealth in society continues to grow. The quarterly national household survey for the June/August period - the most accurate measurement for employment and unemployment - showed an extra 48,700 people at work for the year and 70,100 for the quarter. The total number of persons employed in the State rose to 1.786 million. However, for the first time since the Coalition Government came to power in 1996, there was an annual rise of 1,800 in the number of people out of work. And this translated into a sharp increase of 14,100 for the quarter. The unemployment rate rose from 3.7 per cent to 4.3 per cent for the quarter.
A growing population and workforce makes it imperative for the Government to tackle those bottlenecks that were apparent before the current slowdown in the economy. The transport, electricity, telecommunications, water and sewage systems all require extensive upgrading. And, at a time when private housing starts and completions have fallen sharply, the Government should press ahead in providing tracts of serviced building land. Such a measure is not only necessary to provide social accommodation for lower-paid people in a rapidly growing workforce, but it could dampen inflationary price tendencies in the private housing market in any economic upturn.
The underlying economic fundamentals remain sound and we should guard against undue pessimism. The precipitous drop in the Government's income tax revenue is party explained by the large tax cuts introduced in the last budget. With a modicum of luck and good management, we may still avoid a "hard" economic landing.