Sunday 20 October 2019

Economist reaction: Five ways the economy will benefit - but a lot left undone in 'responsible' Budget 2019

Minister Paschal Donohoe arrives at Government buildings with Budget 2019. Picture; Gerry Mooney
Minister Paschal Donohoe arrives at Government buildings with Budget 2019. Picture; Gerry Mooney

Alan McQuaid, Economist at Merrion Capital

The Minister has called this a responsible Budget. In many ways he is right, but he is unlikely to get many plaudits from the Irish public, but from an economist's perspective there were positives.

1) The Minister has targeted a balanced budget for 2019 in terms of meeting its EU requirements under the Maastricht Treaty, a prudent move given the number of risks the Irish economy faces over the next number of years, most notably Brexit.

2) He has put money away in the "rainy day fund" and announced positive funding initiatives for the most vulnerable sectors exposed to "Brexit", the SME and agri-food industries

3) Income-tax cuts, albeit modest, should boost disposable income, and lead to increased personal spending in 2019, helping to sustain strong economic growth next year

4) The overall thrust of the Budget should continue to help the labour market, and push the economy closer to full employment

5) The Budget will be well received by financial markets and should keep Ireland's borrowing costs down, crucial at a time when Ireland faces significant bond redemptions over the next couple of years, and will require new funding to offset these payments

Of course there are many who will say that the Minister didn't do enough on any aspect:

1) He didn't cut personal taxes enough

2) He didn't raise social welfare payments enough

3) He didn't do enough to address the housing problem

4) He let the tourism sector take the brunt of the increase in taxes

5) He chickened out as regards carbon taxes

6) He didn't put enough away in the rainy day fund

7) He didn't target a budget surplus given the strength of the economy

And so on and so.....

Let's get real here. This was never going to be a dramatic Budget. The Minister was always going to play it relatively safe given all the uncertainties the Irish economy faces over the next few years, most notably Brexit.

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