Minister for Finance Michael Noonan has said the October budget will take less than €2 billion from the economy, saying improving conditions in the ecnomy will enable the Government to cut by less than forecast.
Mr Noonan’s remarks evening to an Oireachtas committee are in defiance of demands from the International Monetary Fund, the Fiscal Advisory Council and the European Commission that the Government should maintain the €2 billion target.
The Minister said conditions had improved since April, when the Department of Finance a €2 billion retrenchment package would be required to receive the EU-mandate target next year of a budget deficit below 3 per cent of economic output.
“At that time, the best information available to us was that it would take an adjustment of €2 billion to get under the 3 per cent deficit by 2015,” he told the Oireachtas finance committee.
“There’s a lot of moving parts then as the year goes by. I couldn’t give you an exact figure but I’d be fairly confident saying it would be less than that now to achieved 3 per cent because a lot of things have been moving in the right direction.
“Some things have been moving in the wrong direction as well. But on balance, there are more plusses than minuses in the budgetary position for the first five months of the year.
“You will recall that our target deficit for 2014 was 5.1 (per cent) , that we decided to go for a bit lower than that and we built the budget on the expectation of a deficit of 4.8 (per cent).
Now, on the evidence to date in the first five months of the year, it seems it will be somewhat lower than that.
“I’m not in a position to say by how much. You’ll be aware of the fact that tax significantly ahead of budget, expenditure is under control, there are other items around the fiscal position that are favourable.”
IMF’s mission chief for Ireland, Craig Beaumont, said today the organisation believed Ireland should stick to its annual deficit reduction targets irrespective as to whether economic growth came in ahead or behind expectations.
This would mean continuing with the €2 billion adjustment, irrespective of whether tax receipts proved stronger than expected. Any additional revenue, he said, could be used as a “buffer”, he said.
Ireland’s economic recovery was “broadening” but the continued need for further measures to get the budget deficit on target by 2018 will create political challenges, the fund said in its first post-bailout report on the Irish economy published today.
