Minister Donohoe publishes the Government’s Summer Economic Statement
The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe T.D., today (Tuesday) published the Government’s Summer Economic Statement (SES). The SES forms a key element of the reformed budgetary process by providing a policy background for the discussions in the Dáil and, subsequently, at the National Economic Dialogue on 27th and 28th June.
The SES 2018 sets out that:
· The Government is targeting a deficit of 0.1 per cent of GDP next year, or better;
· This would accommodate a budgetary package of €3.4 billion;
· €2.6 billion has already been pre-committed to expenditure measures as outlined in the Stability Programme Update;
· This leaves €0.8 billion for further allocation in Budget 2019;
· Any unfunded taxation or expenditure measures that go beyond this would involve more borrowing and result in a subsequent deterioration in the deficit position;
· Furthermore, using all the available ‘fiscal space’ – would allow the allocation of an additional €0.9 billion in Budget 2019.
· However, this would increase the deficit by an additional 0.3 per cent of GDP and would represent the wrong choice for the economy at this stage of the cycle. It would also mean that we would miss our Medium Term Objective (MTO) target for 2019 and that Ireland would be in breach of the fiscal rules;
· Budgetary policy will instead be framed to reduce borrowing, rebuild our fiscal buffers and support steady, sustainable increases in living standards to ensure we are protected into the future.
Speaking at the launch of the SES, Minister Donohoe said:
Our economy is in good shape at the moment and this is reflected in the labour market. The level of employment is close to its highest level ever and we are approaching what could reasonably be called ‘full employment’. This is a welcome development but as capacity constraints are increasingly becoming a feature of some sectors this, in turn, could lead to overheating of the economy. In this context, it is vital that Government policy does not add fuel to the fire but that we make sensible and prudent decisions now to secure our hard-won gains and ensure the continuation of sustainable future growth.
While the economic situation is relatively healthy at present, it is clear that the external environment is also becoming increasingly challenging. A crucial policy response is to build up our capacity to respond to these challenges. This is why the Government is prioritising reducing public debt, further working down the deficit, establishing a Rainy Day Fund and avoiding pro-cyclical budgetary policies. While there are risks ahead there are also opportunities; our goal is to position our economy to minimise these risks and to maximise the opportunities that lie ahead. The objective is to ensure the progressive and steady improvement of living standards and the further improvement in public services, along with continued incremental and sustainable investment in the future to ensure the delivery of lasting prosperity for all of our people.