The International Monetary Fund is forecasting slippage in the Government's deficit target for this year. In a new report on fiscal sustainability, the International Monetary Fund says Ireland's fiscal deficit this year will be 10.8%, an increase of 0.8% over the Government's medium term plan.
The IMF also says the Government deficit will not reach the 3% target level in either 2015 as in the new Programme for Government or 2016, when it is forecast to be 3.8%.
The report criticises the US and Japan for not engaging in fiscal tightening, but says Europe is making good progress. Only Japan, the US and Ireland will have budget deficits in excess of 10% this year, out of 59 advanced and emerging economies surveyed by the IMF.
The Fund warns that debt ratios are still rising in most advanced economies, and government borrowing needs are at historic highs.
It says the average government gross debt ratio is projected to breach 100% of GDP for the first time since the aftermath of World War 2, and urges all countries, but especially the US, to do more to reduce debt and deficit levels.
Gilmore not surprised by IMF forecast cut
The Tánaiste and Minister for Foreign Affairs, Eamon Gilmore, has said he was hopeful the Government could take decisions as early as this summer regarding savings in public expenditure.
Mr Gilmore said the Government has agreed the comprehensive expenditure review, but if it was possibly to identify savings then that would be done.
The Minister was speaking in Luxembourg where he was attending an EU Council meeting focused on developments in Libya.
The Tánaiste was asked about Ireland's economic situation when he arrived at today's Foreign Affairs Council meeting.
Mr Gilmore said he was not surprised that the International Monetary Fund had significantly reduced its growth forecast for Ireland. It said it was one of several forecasts, and it was not certain that the Department of Finance would follow suit.
Asked if it was now certain that there would be further public sector wage cuts before 2014, Mr Gilmore said the Government was very clearly determined in implementing reforms which were outlined in the Croke Park deal.
The Tánaiste said the comprehensive expenditure review outlined by the Government yesterday would take place through the summer, however if savings could be made which would benefit the state, then those decisions would be taken as soon as possible.
Asked if such decisions could take place as soon as the summer, Minister Gilmore said hopefully.
Health costs huge risk to advanced economies - IMF
The cost of health care poses a burden to developed countries that could spark immense financial crises if not contained, the International Monetary Fund also warned today.
Even countries that move decisively to contain and cut the costs of keeping their populations healthy will find it is not enough and will have to cut spending elsewhere for fiscal stability, it said.
'Rising spending on health care is the main risk to fiscal sustainability, with an impact on long-run debt ratios that, absent reforms, will dwarf that of the financial crisis,' it said.
In another report on the world's financial health released today, the IMF warned that many advanced countries are living beyond their long-term fiscal means, especially in the wake of the 2008-2009 crisis.
The IMF said health costs will be the biggest burden for governments, and that the main driver is not aging populations but generous health care systems, costly procedures based on new technologies, and the rising incomes that have so far afforded rising medical costs.
The US, with the largest fiscal deficits and costliest health care system in the developed world, is most at risk. But Western European countries and wealthy Asian nations like South Korea and Japan, are not far behind.
The burden of health care in 2008 averaged 7% of GDP in developed countries, with the US close to that and France more than 8%. 20 years from now, health costs will grow another three percentage points of GDP in all the countries, and 5% more in the US.
All this increase of costs relative to governments' financial resources, the IMF said, will amount to 'three times the estimated impact of the financial crisis on advanced economy public debt'.
It said many countries have scope to wrest costs under control via market-based policies, caps on spending, and supply and price controls. More competition among insurance companies for consumers was the best but not only way to cut health care costs, the IMF said.
It also pointed to improved public management and budget ceilings. But even the most aggressive reforms were not going to save the most indebted countries.
'The impact of these reforms may still fall short of what is needed in some advanced economies to stabilise public health spending as a share of GDP,' it said. 'This means that further adjustment measures elsewhere in the budget will be required to control the growth of public spending,' it added.
