Why slowdown in growth may lead to more economic cuts
Published 22/08/2011 | 05:00
While most people see €3.6bn of cuts as the main target of this year's Budget, the actual target is making sure that Ireland's budget deficit is below 8.6pc of Ireland's gross domestic product (or national output).
When the bailout programme was originally drawn up, the Government thought that our GDP was going to grow by 2.5pc this year -- but most sources in the international authorities now admit that this looks highly "unlikely".
Slower growth next year means that the Government will have to cut more from the Budget if it wants to make sure that our deficit remains less than 8.6pc.
This is because, if our GDP was initially expected to be about €100bn, we could have run an €8.6bn deficit, but if it now comes in at €90bn, our deficit can only be €7.74bn (or 8.6pc of €90bn).