Government departments have been told to tighten their belts in the initial salvos of the annual Estimates round as officials from the European Commission visit Ireland to monitor economic progress here.
The overall level of day-to-day Government spending for next year has not been set and the Department of Finance is still attempting to quantify the likely impact of the terrorist attacks on the US on the Irish economy. The Minister for Finance, Mr McCreevy, has already admitted that the economy - as an exporter - is not immune to outside shocks.
The Department originally forecast a surplus of income over spending this year of £2.5 billion (€3.17 billion) but has since reduced this by £750 million with some officials admitting that the shortfall may be as much as £1 billion.
However, even that may be optimistic and the Department is keen to hold off on the Estimates for as long as possible to have maximum information on tax revenue.
Writing in AIB's latest quarterly commentary, economist Mr Oliver Mangan, warned that ongoing spending rises of more than 20 per cent in the face of a slower tax take meant a Budget deficit in 2002.
All departments are thought to have submitted very expensive claims but most will have to find cutbacks in advance of the bilateral meetings between ministers and Mr McCreevy next month. The spending priorities are likely to be health, social security and combating crime.
Mr McCreevy remains under pressure from the European Commission and his fellow finance ministers. Tomorrow a team from the European Commission will be in Dublin again to meet the Minister as well as officials from the Departments of Finance and of the Taoiseach to assess whether the State is complying with a recommendation early this year to take measures to avoid overheating.
Inflation data released yesterday showed that consumer price rises slipped back to 4.6 per cent in August from 4.8 per cent in July. On the EU-harmonised basis inflation fell back to 3.7 per cent, a figure the Minister is likely to be highlighting in talks with the Commission. Inflation has averaged 5.2 per cent over the first eight months of the year.
The cost of package holidays also rose in August as did newspapers and magazines. One area of downward pressure was the cost of petrol and home heating oil reflecting lower world oil prices. It is so far unclear whether these will rise again in the aftermath of last Tuesday's terrorist attacks.
Over the year house prices have increased by 14.5 per cent on the back of increases in rents, higher service charges and increases in the size of average mortgages.
