A senior Department of Finance official has expressed anxiety about the “imbalance” in the housing market, citing concerns about competitiveness and foreign direct investment.
John McCarthy, chief economist in the department, told the Oireachtas finance committee yesterday the completion of 13,000 new homes this year compared with an estimated annual requirement for 25,000 new housing units.
“From a competitiveness perspective, from an FDI perspective, that’s something I would be concerned about,” he said.
Mr McCarthy was responding to People Before Profit TD Richard Boyd Barrett, who complained about rising rents and other property issues.
He was speaking as the department presented the economic forecasts which will underpin Budget 2016 on Tuesday. Officials told the committee that continued economic growth is forecast to support the creation of 47,000 jobs in 2016 on top of 53,000 new jobs in 2015.
The budget plan assumes gross domestic product will grow this year by 6.2 per cent and grow by 4.2 per cent in 2016, forecasts endorsed by the Irish Fiscal Advisory Council.
Mr McCarthy told the committee such forecasts assumed a €1.2 billion fiscal package on Tuesday, the lowest point on the range between €1.2 billion and €1.5 billion on which the Government settled in April.
“We will have to change the economic forecasts should there be any deviation from the €1.2 billion,” he said.
Although Mr McCarthy acknowledged many of the tailwinds behind the growth were external to the Irish economy, he was very encouraged by the “robust recovery” in domestic demand.
“Over the past year, you’ve seen personal consumer spending rise very, very strongly and you’ve seen confidence improving. My own view would be the recovery in confidence is mainly due to what is going on in the labour market.” The number at work was up 130,00 from its low point, he noted.
His assessment was the risks to the department’s baseline scenario were tilted somewhat on the downside. These were mainly external, he said.
The main cloud on the horizon is China,” he said, adding that China’s investment-driven growth model was running out of steam.
