ANALYSIS:THE DUST has not yet settled from last Tuesday's budget, but already economists are saying that the Government will have to (and should) have a "mini-budget" early next year, writes Laura Slattery
According to Goodbody Stockbrokers economist Dermot O'Leary, the economic forecasts presented in the Budget were "overly optimistic".
Economic growth (gross national product) will decline by 1 per cent next year, according to the Department of Finance, but O'Leary says it's more likely to shrink by 4.5 per cent.
The Government's assertion that consumer spending will grow by 0.5 per cent in 2009 is "off the wall", he believes: consumption will instead plummet by 3 per cent. It can't help but go down, O'Leary says, because thousands more workers will lose their jobs (and therefore their spending power), while those who do manage to hang on to their incomes will keep their hands in their pockets and save.
Part of the reason for the anomalous gap between forecasts is that this was a budget drafted in the dark. The earlier-than-usual date means the Government did not have the benefit of the important November tax returns as it usually does, so the economic projections that form the rationale for its tax and spending measures could already be seriously out of kilter by Christmas - by about half a billion euros, Goodbody predicts.
Of course, the Government could choose to simply tack more draconian measures on to next month's Finance Bill.
However, O'Leary believes that it will come back for more, targeting cutbacks in the day-to-day running of the public sector, in the form of a mini-budget. If it doesn't, and budget day reverts to December next year, the economy will be left to fester for a full 14 months without intervention.
O'Leary, who it is worth noting was no cheerleader for the Irish economy this time last year, says the Government has "a fine balancing act" to perform in terms of public confidence. Consumers are already "turning off the spending tap".
So could it be Budget 2009: The Return? Ominously, if there's one thing we know about sequels, it's that they tend to be worse than the original.
