Irish Economic Outlook Report Prompts Budget Adjustments

by Robert Lee, Tax-News.com, London

22 August 2001

The Irish Department of Finance published its Annual Economic Review and Outlook earlier this week, dealing with the out-turn for the economy for 2000 and the prospects for 2001.

The report states that Ireland experienced strong economic growth last year with GNP rising by 10.4 per cent in real terms, and GDP increasing by 11.5 per cent - more than three times the EU average. Employement rose to around 77,000, and although inflation accelerated, the General Government Surplus emerged at 4.5 per cent of GDP. This was the seventh successive year of good economic expansion.

For the outlook for 2001, GNP is forecast to grow by 6 per cent in volume and GDP by 7¼ per cent. While this is significantly slower than last year the report claims that these rates of growth are still high in both international and historical terms. The review is the first economic update to take place after events such as the downturn in the world economy, adverse developments in the information and communication technologies (ICT) sector and the outbreak of foot-and-mouth disease which have all been blamed by the report for dampening growth prospects this year.

According to the report, the slowdown is reflected in 'lower than anticipated tax receipts during 2001 and a reduction in the exchequer surplus forecast for 2001.' Inflation is also expected to reduce further during the second half of the year after declining by less than expected during the first half.

After the release of the Economic Review and Outlook the Minister for Finance, Charlie McCreevy, told reporters that 'it will be necessary to adjust [Budget] expectations to meet the new situation.' Already tax revenue calculations have been cut by £500 million.

A statement issued by the Department of Finance commented that the low growth rates 'point to a need to align aspirations for future increases in public spending and further tax relief to levels consistent with a prospectively slower pace of economic expansion.'

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