The Tánaiste has rejected suggestions the economy is now in recession and she has warned against hyping the difficulties on the jobs front. Mary Harney was responding to opposition deputies in the Dáil who expressed concern about the recent spate of lay-offs and redundancies, particularly in the North Dublin area.
She said, however, that there had also been a huge downturn, particularly in the IT sector. She added that the downturn had been exacerbated by the events of 11 September.
Her comments came as the Government's economic think-tank recommended that Charlie McCreevy should give away £900m in next month's Budget. The Economic and Social Research Institute has told the Minister for Finance the give-away should be in the form of tax cuts and spending increases.
The ESRI, in its quarterly report, also said that the Government would have to borrow £500m to achieve this. The ERSI predicts that the economy will grow by 3.4% next year, although there are risks that growth could be even lower.
It is the fourth time since the summer that the ESRI has published a different economic growth forecast for next year. Three months ago, it put growth at 6.2%. Two months ago it said 1.8% was far more likely.
A month ago it went back up to 4.3% and now today the ESRI revised it back down to 3.4%. The fact that the ESRI appears to be at sixes and sevens about its economic growth forecast reflects widespread uncertainty among economists about Ireland's economic prospects for next year.
The upshot of the deterioration in our prospects will have a serious effect on the public finances for 2002. The ESRI says that a £900m spending spree is needed to adjust tax allowances and social welfare payments for inflation.
The institute says that the increase in national debt that would result from the Government's borrowing need not be an immediate concern, given that it is a response to a severe cyclical economic slowdown.
