Slowdown ‘inevitable’ but no signs of crash coming
Fiscal council chairman Séamus Coffey sees risks not being comparable to those of 2007/2008
‘Things are growing quite strongly at present and there will be a slowdown in the Irish economy,’ says Séamus Coffey, chairman of the Irish Fiscal Advisory Council.
The Irish economy will inevitably slow down in the medium term but does not appear to be heading for another boom-bust crash, the chairman of the Irish Fiscal Advisory Council (IFAC) has told The Irish Times.
Speaking to the Inside Business podcast, Séamus Coffey, who is a lecturer in economics in UCC, said: “There’s no doubt we’re in an upward phase of the business cycle. Things are growing quite strongly at present and there will be a slowdown in the Irish economy. I think that’s inevitable but I don’t think the risks of a crash are anywhere comparable to what they were in 2007 or 2008.
“If you look at the Irish economy now...the recovery has been relatively broad based. In terms of a crash I think there’s probably greater risks in the government finances because of things like [inflated] corporation tax than there is for the economy as a whole.
“And if there wasn’t to be a crash-out Brexit, you could well imagine the Irish economy continuing to perform well over the medium term because of the broad-based nature of the growth we’ve had. It’s not anywhere near as concentrated as it was back in 2006 or 2007.”
Mr Coffey’s comments assumed a hard Brexit would be avoided by the UK. His comments were made on the day when Boris Johnson laid out his pitch to become the next leader of the Conservative Party in the UK.
Mr Johnson said he doesn’t want a no-deal Brexit but the country must prepare for one as a negotiating tactic with the European Union.
An IFAC assessment of the Government’s medium term spending plans , published this week, called for some of the record €10 billion-plus annual corporation tax receipts accruing to the State at present to be put into a “prudence account” that could act as a buffer in the event of a downturn rather than spending it on services or tax cuts.
IFAC also said the Government’s spending plans to 2023 were not “credible” as they suggest an implausible slowdown in spending out to 2023.
In terms of Budget 2020, Mr Coffey had this advice for the Minister for Finance Paschal Donohoe. “In their latest Stability Programme Update they had plans for 2020 and the advice from the fiscal council is to stick to them. That would imply €2.8 billion of budgetary measures for 2020, which is quite a significant amount albeit that a lot of it has already been committed.
“In or around €2 billion or €2.2 billion has already been committed so the minister will have €600 million available from net measures on budget day. This time last year they were talking about €800 million. The view of the fiscal council is that the Government should stick to that level.”