Government projections suggest austerity could end in 2016

Ireland is set to face at least two more years of tax increases and spending cuts before austerity begins to ease, according to recent Government spending projections published this week.
 
According to initial formal projections for Government spending and tax revenues beyond 2015, the potential for a neutral budget in 2016 ultimately depends on a number of variables – the recovery in Irish and global economies, the successful implementation of austerity budgets over the next two years, and no additional banking costs.
 
However, Professor Patrick Honohan, governor of the Central Bank, believes banks will require further capitalisation before 2019, when new global rules on capital requirements come into effect. A ballpark figure for how much more capital was required, however, was not given.
 
If the 2016 budget does not contain additional taxes and spending cuts, it will be the first non-austerity budget in eight years.
 
Minister for Finance, Michael Noonan has refused to be drawn on next year’s budget, which is due to be finalised in the autumn.
 
Noonan said, to the Oireachtas Committee on Finance, Public Expenditure and Reform, that any new forecasts would be underpinned by a “technical assumption” that the promissory note savings, secured in February, will be allocated to deficit reduction.
 
In the Government’s first update of economic and budgetary projections for 2013, gross domestic product (GDP) is forecast to grow by 1.3 per cent this year and 2.4 per cent in 2014. It is hoped GDP growth will reach 2.8 per cent by 2016.
 
Meanwhile the initial 2016 unemployment rate forecast stands at 12.3 per cent, down from 14.7 per cent.


Image: rich_w (flickr)

Date published 2 May 2013 | Last updated 2 May 2013