Noonan resolute on budget plans
Minister for Finance Michael Noonan said today a gloomy growth forecast from the Economic and Social Research Institute on the prospects for the Irish economy will not lead him to change next week’s Budget.
According to the ESRI report, which was published this morning, much weaker economic growth than previously anticipated in Europe will seriously affect the Irish economy’s performance next year. The report's lead author, Dr Joe Durkan, said Europe faces a repeat of the 1930s Great Depression if the debt crisis is not brought under control
Compared to its last assessment three months ago, the institute is now more pessimistic about next year’s economic prospects by almost every measure, including employment.
At the beginning of September the ESRI believed that the numbers at work in the economy would grow in 2012, the first increase in half a decade. Now it believes that a further net decline of 22,000 jobs will take place between this year and next. Of this, 15,000 will be accounted for by the already much-shrunken construction industry.
Speaking in Brussels today, Mr Noonan said the institute’s latest assessment was in line with other forecasts and the Government was already on “solid ground” with its budget plan.
“Forecasters are changing their forecasts so that’s not unexpected. Ibec changed their forecast, we changed our forecast in preparation for the Budget in the Department of Finance,” Mr Noonan said. “There are two tendencies. One is to mark up growth for 2011 and the ESRI have done that again ... then to mark it down for 2012 and they’ve done that also.”
Mr Noonan, speaking to reporters as he left an EU meeting, said he would not be revising his plans. “I suppose the question is will this change the approach to the budget because the ESRI being a state agency that we take a lot of notice of - it obviously is influential - but it won’t,” he said. “If we you look at their full report, they’re actually predicting that we’ll have a lower deficit than we’ve pencilled in for the budget.
“They’re saying that with the growth rates that we are forecasting we will hit a deficit target of 8.3 per cent at the end of the year so taking their full report into account we don’t have to make any changes in our budgetary strategy.”
Forecasts were moving up and down as a result of the turmoil in the euro zone and the wider global economy, he said. “We’re in a period of great volatility in Europe and indeed in the wider international world so we’ll have to do our best. But we’re about mid-range in the forecast that we have based the budget on so we think we’re on pretty solid ground.