Category: Archive

Irish told to tighten belts as GDP shrinks

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — Ireland’s economy is slowing and people will have to moderate their expectations as the era of tax cutting and rapidly increasing public spending has ended, the Department of Finance warned last week.

The economy will grow by 3 percent GDP this year, compared with the 3.5 percent forecast in last December’s budget, according to the department’s latest Economic Review and Outlook. The department also predicts inflation will be about 4.5 percent for the year as a whole, also above the budget estimate.

The review highlights that there had been more public spending than had been expected and a lower yield from taxation.

The government is struggling to get spending back under control after it skyrocketed by 22 percent in the first seven months of the year, far above the total year figure of 14.4 percent in the budget.

“Following a sustained period of very strong growth since 1994, the Irish economy slowed markedly last year, particularly from around mid-year,” a statement accompanying the review said. “The slowdown reflected a number of factors, including more subdued demand growth in our major trading partners, difficulties in the information and communications technology sector, and the restrictions aimed at combating the threat of foot-and-mouth disease.

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“However, employment continued to grow, bringing unemployment down further. Inflation, while easing, remained significantly above the euro-area average.

“On the basis that the international economic recovery gains momentum and that competitiveness is maintained, a pick-up in domestic economic activity is envisaged.”

Commenting on the review, Finance Minister Charlie McCreevy said that while the short-term outlook for the economy is subject to ongoing uncertainty, Ireland retains the potential for comparatively strong growth in the medium term, provided international growth is maintained and the country maintains its competitiveness on world and domestic markets.

The review led to renewed accusations from opposition parties that the state of the public finances had been hidden until after the general election in May.

“People were fooled into believing that the pre-election inducements in this year budget were built on solid foundations,” said Fine Gael Finance spokesman Richard Bruton. “The reality is that the minister misrepresented both the cost of spending commitments he was making and misrepresented the available resources.”

Bruton said government cutbacks are hitting some of the most vulnerable in society, particularly in the health area.

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