‘Irish budget deficit may be eliminated in next 3 years’

Ireland’s budget deficit should be eliminated in the next three years, with a surplus of nearly 2% of GDP being generated by 2019, a British economic think-tank has claimed.

The London-based Centre for Economics and Business Research has suggested that economic growth will significantly lag consensus opinion this year, but be better than expected next year.

Its outlook for Ireland’s continued recovery, however, is based on the Government sticking to its austerity plan and not deviating from its planned €2bn adjustment pencilled in for Budget 2015.

While most domestic commentators are expecting Irish GDP to grow by 2% to 2.5% this year, and by a little over 3% next year, the Department of Finance is anticipating the economy will grow by 2.1% this year, and by 2.7% in 2015. The centre thinks a slow pick-up in consumer spending and weak exports will keep GDP growth constrained to just 1.3% this year.

However, it feels that Ireland’s prospects are very healthy, overall, with it forecasting a budget surplus — of 0.8% of GDP — by 2018. For 2015, the centre is forecasting Irish GDP growth of 3.4%, the most confident outlook offered to date.

While it sees export performance being hit by the pharmaceutical patent-cliff this year, the centre expects consumer spending to significantly recover from 2015 onwards and for the services sector to take up the slack in the export market. A recovery in construction will also play a part, it said.

“The Centre for Economics and Business Research was the first external forecaster to predict that the Irish recovery plan would work,” said the body’s chairman, Douglas McWilliams.

“We now see sufficiently strong growth in the Irish economy to eliminate the budget deficit, altogether, by 2017 if politicians can resist the temptation to start spending money again,” he said.

Centre director Oliver Hogan added: “Because exports are a relatively lowly-taxed sector, the export shortfall has done little damage to the Government’s fiscal plans and, provided that the predicted growth revival takes place, the government deficit should be eliminated by 2017 and surpluses of 0.8% and 1.9% are predicted for 2018 and 2019.”