Monday 19 March 2018

Noonan: 'No daft spending spree' as the economy roars back to life

Finance Minister Michael Noonan during a press briefing at Government Buildings, Dublin
Finance Minister Michael Noonan during a press briefing at Government Buildings, Dublin
Conall MacCoille
Donal O'Donovan

Donal O'Donovan

Michael Noonan moved quickly to dampen hopes of a giveaway Budget despite latest figures showing economic growth powered ahead in the first half of the year.

The minister said there would be no "daft spending spree" announced in October, despite Ireland recording a growth rate in the first half of the year to rival emerging markets including China.

Excluding currency effects, the economy grew by 7pc in the first six months of the year and would grow by around 6pc for 2015 as a whole, the minister said.

Growth was a staggering 12pc in the period, when the impact of the weak euro is accounted for.

Mr Noonan said his Budget priorities include bringing down personal taxes so that emigrants come back home, tackling childcare access so that more women go back to work, and the need for a "very strong package on innovation."

The latest Central Statistics Office (CSO) data shows the value of the Irish economy measured by gross domestic product (GDP) was €50.14bn in the three months to the end of June, putting it on course to top €210bn this year, the Minister for Finance said.

With the national debt forecast to come in at €208.2bn at the end of the year, it means debt will be less than GDP for the first time since the crash, even if, at 99pc or 98pc, it is just by a whisper.

Coming so soon after the bubble, the strength of the latest data will ignite fears that the economy could once again race out of control with potentially dire consequences.

However, Mr Noonan said the economy is not in danger of overheating.

He compared it to a bucket filling with water, and said: "You create a bigger bucket". He will stick with plans to increase the October Budget by €1.2bn to €1.5bn, he said.

"We must act with a steady hand. There will be no daft spending spree just because it is an election year."

Spending will not be cut, a move that could potentially cool the economy, he added.

"Unemployment is still 9.5pc, we still have a lot of emigrants who now want to come home. So we need to do things in the Budget to grow the economy."

Economist Conall MacCoille of Davy backed that assessment, citing high unemployment, and construction output that is still half peak levels.

However, in some services sectors, housing and infrastructure, some "bottlenecks" were already forming, he said.

The pace of growth was boosted beyond Department of Finance forecasts by factors including the plunge in global oil prices from the expected $105 a barrel level to under $50.

That is driving down costs and encouraging consumer spending, Mr Noonan explained.

The European Central Bank's (ECB) quantitative easing programme launched in March is helping boost the Irish economy, he added. QE works by pumping euro into the economy and has driven the currency down compared to the US dollar.

That boost to the affordability of our exports has added 5pc to take the so-called nominal growth rate to 12pc.

The CSO data shows output increased across the economy. Industry saw the biggest growth of 4.2pc, but there were big gains too for construction and services, the data shows.

Personal consumption, the largest element of domestic demand, rose by 0.4pc while Government spending fell.

Irish Independent

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