The Government has kept its budget-time economic forecasts unchanged in spite of worsening economic data, prompting charges of complacency from the Opposition, writes Marc Coleman, Economics Editor
The Economic Review and Outlook was published yesterday by the Department of Finance and contains the latest Government forecast for the economy. According to the review, GDP - the value of goods and services produced in the economy - is expected to grow 5.1 per cent.
The Government has meanwhile raised its forecast for jobs growth, predicting that 55,000 new jobs will be created this year. At budget time, it was expecting 35,000 new jobs.
Inflation is predicted to average 2.4 per cent, up from 2.2 per cent in 2004 as a result of oil price pressures. The General Government Balance - a standard measure of the Government's annual financial position - is projected to be in deficit of 1 per cent of GDP by end-year.
The GDP forecast for 2005 remains unchanged from its previous budget time projections. But according to Central Statistics Office (CSO) data, GDP growth was 2.4 per cent in the first quarter of this year, while CSO trade statistics released on Wednesday imply export performance remained weaker in subsequent months.
Announcing the forecasts, Minister for Transport Martin Cullen said that in spite of challenges, the economic outlook remained positive.
"These figures confirm that our economic fundamentals remain strong. Once again, Ireland continues to enjoy low unemployment, high rates of job creation, rising incomes, budgetary stability, low inflation and buoyant economic growth," said Mr Cullen.
He added that when costs associated with the refund of nursing home charges are considered, the budgetary outlook is for an Exchequer Borrowing Requirement of not more than €2.7 billion. This compares with budget-time plans for an Exchequer Borrowing Requirement of €2.9 billion.
But Richard Bruton, Fine Gael spokesman on Finance, said the economy was more fragile than it had been for many years.
"Beneath the healthy projection of economic growth in the coming year, there are worrying indications of vulnerability. There has been a sharp fall-off in exports, industrial productivity is faltering and the economy relies heavily on the construction industry and consumerism in order to maintain growth," said Mr Bruton.
He also said that in spite of low overall inflation, Irish inflation is higher than in the EU as a whole in certain key areas.
"The Minister states that we must keep inflation in line with our international peers. However, Irish inflation is running well ahead of our European neighbours in key areas under Government influence, with health, education, housing and electricity running at two and three times the euro-zone rate," said Mr Bruton.
Brendan Howlin, Labour Party spokesman on Enterprise, Trade and Employment, accused the Government of complacency in the face of rising oil prices. "We need a strategy for dealing with the rise in oil prices to ensure that the economy and employment in particular are given the maximum protection possible," said Mr Howlin.
Siptu economist John McCartney said the latest forecasts showed the Government had scope for significant pay increases. However, the Institute of Certified Public Accountants (CPA) pointed to "subdued growth" in the industrial sector during 2004. "An economy which overly depends on expenditure taxes and consumption for survival is heading for a dangerous place if the productive sector goes into decline," said CPA president Michael Dolan.