Government borrowing could rise to 8% of national income
Departments now examining how a wider system of credit supports for businesses could operate
Robert Watt, Secretary General for the Department of Public Expenditure and Reform: Supports equivalent to around 4 per cent of national income had been committed and more will be needed
Speaking at an online economic seminar on Friday, he also indicated that government departments were now examining how a wider system of credit supports for businesses could operate, helping companies through the crisis while also protecting the taxpayer.
The Government is to publish its updated economic forecasts in the Stability Programme Update to be sent to the EU before the end of the month. Mr Watt told the seminar, organised by the Geary Institute in UCD, that a budget deficit “of the order of 8 per cent of national income” could be expected for this year. Already income supports, additional health spending and liquidity supports equivalent to around 4 per cent of national income had been committed, he said and more will be needed on loan schemes for businesses.
Business groups have welcomed the rapid move by the Government to put in place wage subsidies, but have warned that companies face major difficulties now in not being able to pay other bills. In relation to requests for company and sectoral supports, Mr Watt said work was underway in Government departments.
Protecting the taxpayer was vital , he said, and among the issues to be considered were whether the State should advance support via debt or equity, what collateral should be available for supports and whether the State would have priority over trade creditors when it can to repayments.
Policy would also consider the risk of balance sheet impairment for companies, he said, and its impact on future growth.
The economy was better positioned then when the last two major international recessions hit in the early 1980s and in 2008, he said.
The State had moved quickly in response to the crisis, he said, but there was much more to do. The outlook remained hard to predict and “there is significant uncertainty in how, and when, consumers, supply chains, and economies will return to normal”.
The economy had taken a massive direct hit and knock-on effects in the Irish and global economies were hard to predict. In responding quickly, the State had to accept some level of risk, he said, but had sought to direct resources directly to the people and companies who needed it, while higher spending would also help to support demand in the economy.
In terms of promoting recovery, Mr Watt said the State would need to look at sectoral supports, labour market interventions and investment in areas like infrastructure and housing.