OECD warns Government growth will plummet by 2020
Economic growth is set to slow and the Government needs to build up its financial reserves as risks such as Brexit and possible changes to the international tax regime looming.
The warning came from the Organisation for Economic Cooperation and Development (OECD), a grouping of the world's richest economies.
It said in a report on the global economy that growth in Ireland would slow to 3.4pc by 2020 from 7.2pc this year, still far faster than the rest of the eurozone, and underpinned by strong domestic demand and rising wages.
"The fiscal position will not improve much over the next two years," the Paris-based body said.
"The Government should remain committed to improving the fiscal position, but be ready to ease the fiscal stance to mitigate the impact of a potentially disorderly conclusion to Brexit negotiations," it warned.
In his budget, Finance Minister Paschal Donohoe set aside €500m for a rainy day fund and the Government has been planning for Brexit. However, the Parliamentary Budget Office has warned the projections were based "on the assumption of an 'orderly' Brexit".
The International Monetary Fund said last week that a no-deal Brexit, an increasingly likely outcome, could lop three percentage points off Ireland's growth prospects.
However, Mr Donohoe's budget proposals have overshot on spending, even as bumper tax revenues have filled the Government's coffers and plans for a budget surplus have been put back.
Ireland desperately needs more spending on infrastructure but spending in other areas has continued to rise, sucking up funds. The latest budget numbers in October showed spending rose 9.2pc to €40.1bn, far faster than revenues.