Finance minister: ‘We can withstand trade war challenges’

Minister for Finance Paschal Donohoe

Finance Minister Paschal Donohoe has signalled Ireland should be able to manage any challenges from a possible transatlantic trade war, as preparations begin for next year’s budget.

The Budget will take place on October 9. The Cabinet will discuss the summer economic statement over the next fortnight which will indicate the available spend in 2019.

The minister indicated the process could be influenced by the outcome of a crucial EU summit concentrating on Brexit at the end of this month. 

It will focus on whether Brexit talks can proceed but only if progress has been made on the North and the question of a frictionless border.

Mr Donohoe, confirming the summer economic statement would be published shortly, said: “We will be outlining then, in so far as we can, what we think the outlook for the economy will be in 2019 and beyond that. 

"Obviously, it is very difficult to make a comprehensive assessment regarding what 2019 could look like, given the imminent June European Council and many of the negotiations that are underway in relation to Brexit. 

"But we will be outlining our assessment for the state of play then.”

However, asked about the possibility of a transatlantic trade war damaging Ireland’s economy and future prosperity, the minister stated: “We are a small open economy.

"Anything that happens that negatively impacts on the global trading environment or the tone of the global trading environment can affect the Irish economy. 

That being said, if I look at the rebalancing that has occurred in our economy with the growing strength of the domestic economy and the degree to which our trading performance and our export performance has now diversified, I believe we are now well-placed to manage external changes but we can never be complacent about the challenges they can pose for us.

Parties have begun debating the budget for next year, with Fianna Fáil saying spending should be focused if funds are being set aside for the rainy day fund. 

However, Sinn Féin insists cash-starved services such as health and house building must be addressed and should be a priority over any rainy day fund.

Mr Donohoe said he was well aware of possible increased revenue coming to the Government, from sources such as increased house building.

But he has no plans to spend increased taxes in an unsustainable way, he said, noting: “I have not done that to date. I do not have any plans to do that in the future. 

"But before we get to the point of looking at tax revenue that might be yielded by the increase in the number of homes that we might expect to be built next year, my focus is on trying to ensure those homes are actually built and supplied.”

The country’s fiscal watchdog warned this week that a rapid rise in house building in the coming few years to address demand may risk overheating the economy.

The Irish Fiscal Advisory Council, while saying there was no immediate danger to the State’s finances, warned the minority coalition should pursue a prudent strategy to ensure there was no repeat of policy decisions from the boom.

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