Government must do more to do more in Budget 2016 to narrow the deficit

The Low Pay Commission has to report to the Government by July 15

Colm Kelpie

The Government has been warned it should do more in Budget 2016 to narrow the deficit.

Following its latest post-programme surveillance mission, both the European Commission and the International Monetary Fund said the recovery in Ireland continues to strengthen.

The European Commission noted Ireland was the fastest-growing EU country last year, and that growth is expected to remain buoyant this year and next.

The Commission said it would fully assess the updated forecasts presented with the Spring Statement earlier this week, and said it would give its verdict towards the end of the month.

But it warned more should be done to narrow the deficit down further.

“In light of the very strong economic recovery, a more ambitious budgetary target for 2016 would accelerate the reduction of the high government debt-to-GDP ratio and help protect against future shocks,” the Commission said in the report.

Meanwhile the IMF said Ireland’s “economic rebound is in full swing”.

It was slightly more positive, saying the Spring Statement “steers fiscal policy in broadly the right direction.”

The Washington-based fund said the Government should be targeting a budget deficit of 1.5pc of the value of the economy next year, fractionally more ambitious than the current 1.7pc in part because of high public debt.

“Nonetheless, it appears most likely that revenue could exceed the prudent official projections; such over performance must be saved to ensure an adequate pace of adjustment,” the IMF said.