Noonan trims forecasts but insists growth is on track
Honohan says austerity is the only solution for Ireland
Published 01/05/2013 | 04:00
FINANCE Minister Michael Noonan admitted that the economy will expand less than he forecast in December's Budget but insisted it remains on track to produce jobs and meet European Union debt targets.
Mr Noonan said gross domestic product will now increase by 1.3pc this year instead of the 1.5pc forecast in December, as exports slow more than previously expected due to the European slowdown and the end of patents for some blockbuster drugs made here.
Despite this downward revision, Mr Noonan still expects unemployment to fall and employment to rise this year.
The finance minister added that bank stress tests will probably happen later this year – a deadline that the banks have been resisting. "The origin of the Irish crisis was the banking collapse so it would be unreasonable to expect a full exit without a last scrutiny," he said.
Mr Noonan added the Government will stick to its budget targets for the year but added that he hopes some financial flexibility may emerge "as the year goes by". He signalled that any extra cash, which could be €1bn from 2014, will be used to boost capital spending rather than cutting taxes.
"It seems to me that it's much smarter to use a lot of this, if we're going to use it, on capital rather than current," Mr Noonan told the Oireachtas Finance Committee.
"But I'm not sure whether we should press on with the adjustment next year and do something later. It would depend on the way the year develops, and how we use it best to restore the economy and grow the economy."
The comments came as Communications Minister Pat Rabbitte said: "The mooted privatisation of Coillte looks more unlikely every day."
It leaves privatisation of Bord Gais Energy and ESB's sale of two power-stations in the UK and Spain as the main assets to be sold under the New Era scheme to raise €3bn.
The Government seems on target to bring the budget deficit to below 3pc by 2015 with fewer privatisations.
It beat last year's target and yesterday forecast a deficit of 2.2pc by 2015 under the current austerity plan.
That could, in theory, give the Government some leeway in its budgetary plans, although any let-up would likely have to be signed off by the troika.
Key conclusions from the government review include:
• Government debt-to-GDP ratio is to peak at 123pc this year and begin declining next year.
• Government consumption is set to fall by 2.1pc with investment spending set to increase 3.7pc.
• Import growth has been revised down to 1.8pc.
• Employment growth of 0.4pc projected this year, with an average unemployment rate of 14pc this year.
• Exchequer deficit is expected to be €11.2bn this year, with underlying government deficit expected to be 7.4pc of GDP.