Government forecasts confirm further budget cuts

Tuesday 30 April 2013 22.14
The Government has cut its growth forecast for 2013 from 1.5% to 1.3%
The Government has cut its growth forecast for 2013 from 1.5% to 1.3%

Forecasts from the Department of Finance confirm that there will be two more harsh budgets, despite speculation that the Government might begin to ease up on austerity.

According to the department’s latest Stability Programme Update, there will be spending cuts and tax measures to raise €3.1 billion next year.

That figure will be €2 billion in the budget for 2015, according to the forecast.

The first-pain free budget since the crisis began will be in 2016, when there is also due to be a general election.

The Government has also marginally cut its forecast for economic growth for this year from 1.5% to 1.3% due to a gloomier outlook for exports.

It expects unemployment to fall from 14% this year to 13.3% next year.

It also expects employment will rise and wages will begin to recover this year.

Today’s forecast shows the deficit will go from 7.4% this year to 4.3% next year and it will drop below the crucial target of 3% in 2015, when it will reach 2.2%.

Theoretically that will give the Government more wriggle room to ease back on austerity.

However, if the projections do not materialise then the Government runs the risk of missing its deficit target as set out by the EU and IMF.

Borrowing will be larger than expected this year as the national debt will be 23% bigger than the economy as a whole, as the debt-to-GDP ratio hits a peak of 123%.

However, the Government says this is not because of any deterioration in the finances but because it took advantage of favourable markets to issue more bonds.

In a statement this evening, Fianna Fáil said "any headroom in the public finances needs to be used to generate activity in the labour intensive areas of the domestic economy."