THE CENTRAL BANK has upped its growth and job forecasts stretching until the end of next year – but it continues to pour cold water on calls to use Ireland’s economic windfalls to cut taxes.
In its quarterly bulletin out this morning, it forecast the Irish economy would grow 4.5% this year and 3.4% in 2015 – figures likely to put more pressure on the government to loosen its tax grip at the upcoming budget.
The GDP estimates were up from the Central Bank’s figures from only three months ago, when it forecast growth of 2.5% in 2014 and 3.3% the following year.
Speaking at the Friends of Fine Gael dinner in London today, the Taoiseach Enda Kenny mentioned the news, saying:
“The latest growth figures, including from the Central Bank today, point to an economy that is in recovery. It is clear that our plan is working and the country is now moving in the right direction. We are now in a situation where Ireland has one of the fastest growing economies in Europe.”
He said that the upcoming Budget will be “another stepping stone in our plan to fix the national finances and promote jobs and investment”.
Today it also predicted the official unemployment rate would slide to 11.3% this year and drop to 10.3% at the end of 2015 – down from its last forecast of a 10.5% jobless rate.
The Central Bank predicted exports, imports and personal consumption would all be up on previous forecasts, with only public expenditure continuing to shrink over the next 14 months.
Don’t get too excited, they are bankers after all
In its statement, the bank said Ireland’s economic recovery had “gained momentum and is broadening” – but its was less buoyant than suggested in recent national accounts figures.
“While the latest year-on-year headline growth rate overstates the scale of the improvement in economic performance, the evidence from a range of other data indicates that the recovery has strengthened and is becoming more balanced,” it said.
Encouragingly, the domestic economic recovery has become more broad-based, supported by gradually improving employment and incomes.
“Against this background, consumer spending is growing and, allied to strong growth in investment spending, domestic demand is set to contribute positively to growth in 2014, for the first time since the downturn.”
Pay off debts, don’t cut tax
The improving economic outlook has driven increasingly-vocal calls for the government to cut taxes in the upcoming budget after years of austerity-inspired policies.
Health Minister Leo Varadkar seemingly let the cat out of the bag when he told taxpayers could expect “an extra fiver or tenner in your payslip every week”.
But in its bulletin, the Central Bank said although tax revenues were ahead of target and GDP forecasts were up, the government should use the windfalls to pay off debts and cut its deficit.
“This first post-(Troika) programme budget offers the opportunity to further solidify Ireland’s reputation for creditworthiness; it is important that this opportunity is taken,” it said.
“Beyond 2015, it is imperative to facilitate the return of the economy to lower and safer levels of public debt. Securing debt sustainability through a sequence of primary surpluses is necessary to underpin a more durable recovery.”
- Updated 8.30pm. Additional reporting Aoife Barry
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