Friday 21 November 2014

Ireland will miss targets to slash budget deficit to 3pc by 2015 - OECD

Published 19/11/2013 | 10:02

Michael Noonan, Minister for Finance
Michael Noonan, Minister for Finance

IRELAND will miss crucial targets to slash the budget deficit to 3pc by 2015, according to a report from the influential OECD.

The Paris based Organisation for Economic Cooperation and Development (OECD) is forecasting that Ireland will fall just short of the target to get the deficit to less than 3pc by 2015.

Under EU rules the Government must cut the deficit - the difference between what comes in in tax and other charges and what is spent on services- to 3pc of the value of the economy by 2015.

Meeting that target has been one of the main focuses of the  bailout deal agreed with the EU/IMF.

However, the OECD in a new report said it believes the shortfall in public spending will be 3.1pc of the value of the economy in 2015, missing the target by a whisper.

And it could be worse if growth in the economy does not pan out as expected, they warn.

That contrasts with Government here, which is forecasting that the deficit will be 2.9pc in 2015, better than the target level.

OECD economist Alberto Gonzalez Pandiella told the Irish Independent that they are projecting the deficit figure to be very close to the target.

"The big risk there is the growth outlook. We see that based on the Government plans in terms of fiscal consolidation it would be close to the 3pc, but it depends a bit on what would happen with the growth outlook," he said.

"We see a bit of risk as Ireland remains a very open economy so if growth in trading partners is weaker than anticipated, that would translate into lower growth for Ireland and translate into some impact on the deficit figures. The deficit would be higher than currently projected. "

In its latest global economic outlook, the OECD said Ireland’s economy would grow 0.1pc this year, strengthening to 1.9pc next year and 2.2pc in 2015. This is broadly in line with the projections from the Department of Finance.

 Unemployment will drop to 13.6pc this year before falling further to 13.2pc in 2014.

Mr Gonzalez Pandiella said long term unemployment was the big challenge facing the Government. He said there needed to be a greater focus on this.

"The big concern as we see it is long term unemployment and we see this s one of the fundamental challenges for Ireland and should be one of the main policy priorities," he said.

"The key thing is to help these people get new skills so that when the recovery gains strength they are ready to compete for the openings. "

 The OECD said in its report that a precautionary credit line would be appropriate to mitigate against risks. Mr Gonzales Pandiella said Ireland had built up cash reserves and claimed it would have simply been an insurance policy.

By Colm Kelpie

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