THE GOVERNMENT is set to publish revised estimates for economic growth next Monday – and disclose whether it may need a mini-Budget later in the year in order to meet its deficit targets.
The Department of Finance will publish the latest edition of the Stability Programme Update next week, in which it will reappraise its earlier projections for how much the Irish economy might grow by this year.
The 2012 Budget announced four months ago was based on projections that the economy would grow by 1.3 per cent this year – a figure which has since been undercut by estimates from the European Commission and IMF, who expect growth of 0.5 per cent.
The OECD, meanwhile, has anticipated growth of 1.0 per cent, while the ESRI believes the economy will grow by 0.9 per cent.
The possibility of further Budget measures was somewhat alleviated by figures this week from Eurostat, which noted that Ireland’s budget deficit for 2011 if the costs of the banking bailout were removed – was 9.4 per cent of GDP, well ahead of the 10.6 per cent target set by the bailout.
This gives the government some wriggle room, and could allow the government to absorb any shortfall in this year’s Budget estimates.
In response to a parliamentary question tabled last week by Gerry Adams, Noonan said he remained “confident that we will meet our budgetary targets for the year”.
“The end-March Returns show that taxes have made a good start to the year, performing better than expected in the first quarter and close to 4.5 per cent ahead of profile on an underlying basis,” Noonan said.
“While voted expenditure showed some pressures, I am confident that it will be actively managed within agreed limits”.
A report published at the beginning of the month by the national budgetary think-tank, the Irish Fiscal Advisory Council, raised the possibility of a shortfall of up to €400 million in this year’s Budget forecasts because of a slower economic recovery, which would mean fewer taxes.
The IFAC added that because higher expectations for growth lead to an overstatement in tax incomes, Ireland should introduce an extra €2.8 billion in budget adjustments over the next three years, in order to make sure it reaches its deficit target of 3 per cent of GDP by the 2015 deadline.
Last year’s Stability Programme Update reduced the expectation for growth in 2011 from 1.7 per cent, as outlined in the Budget of December 2010, to 0.75 per cent. CSO figures showed that growth ultimately reached 0.7 per cent for the year.