Interest costs drive spending rise
Budget 2013 envisages total Government spending in 2013 rising to €70.3 billion next year.
The €1.4 billion increase is accounted for by a sharp rise in interest payments on the national debt of €3 billion. This increase includes a €1.9 billion payment, due at the end of March 2013, on the promissory notes used to bail out the banks.
Total Government revenue is expected to rise by €2 billion to €57.2 billion under the Budget plan. All tax streams are projected to generated additional revenues next year.
The Governments deficit will fall by €660 million in 2013, to €12.7 billion compared to 2012, if both spending and revenue targets are met. This will amount to 7.5 per cent of GDP next year.
Only by 2015 does the Government expect the deficit to fall below the 3 per cent of GDP ceiling allowed under EU budget rules.
Minister of Finance Michael Noonan said “fiscal, structural and legislative” changes had been implemented and that all the conditions of Ireland EU-IMF bailout had been met.
He confirmed the deficit between total Government spending and revenue was lower than anticipated in 2012, coming in at 8.2 per cent of gross domestic product. The original target was 8.6 per cent.
Figures published along with the budget show the Government believes the measures outlined will dampen economic activity and have the effect of lowering tax revenues next year by €535 million.
The economic forecasts, which underpin the budgetary arithmetic, show that expectations on jobs have been revised up on just one month ago.
In the November Medium Term Fiscal Statement the Government expected no growth in employment next year. The new projections show a small increase in the numbers at work is expected next year.
The forecasts for GDP and a narrower measure economic activity, gross national product are unchanged. The former is expected to expand by 1.5 per cent next year, while the latter is forecast to rise by 0.9 per cent.
Mr Noonan conceded that the “country still has a long way to go”.
The accumulated debts of the State are expected to peak next year, at 121 per cent of GDP according to the Government’s projections. It is forecast to decline gradually thereafter.
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