Government unlikely to reach budget deficit target of 3%

Thursday 10 January 2013 21.49
Legal impediment on repossession must be removed
Legal impediment on repossession must be removed

The Nevin Economic Research Institute has said the Government is not likely to reach its target of a 3% budget deficit by 2015.

This is due to weaker than forecast economic growth and higher than forecast unemployment.

The trade union-supported think-tank also produced an analysis of income distribution in Ireland, which shows only 14% of households have a gross income above €100,000.

It also said unemployment will rise in 2014 and 2015, unlike official forecasts which foresee declining unemployment.

The Government believes the economy will grow by 1.5% this year. The Central Bank believes it will grow by a little more.

The International Monetary Fund and European Commission foresee a little less growth, but NERI thinks the economy will grow by just 0.6%.

It also sees growth of less than 1% in 2014 and less than 2% in 2015.

As growth of 2% and above is typically required to reduce unemployment, it projects a higher level of unemployment this year - at 15.2% - than the official forecasts of around 14.5%.

The institute said lack of domestic demand, caused by under investment by the public and private sectors, is dragging down growth levels, and pushing unemployment higher.

As a result, it said the Government is not likely to reach its 3% deficit target by 2015, as debt service and social welfare costs will increase because of weaker growth.

NERI has also studied the distribution of income in Ireland, and found that the median household gross income is €42,000, while the average household gross income is €56,500.

However, almost two thirds of households have a gross income below this average, while 14% of households have a gross income of more than €100,000.

For individuals, it found that an income of €60,000 a year would put them in the top 10% of earners.